Breaking away: talk about shattering the glass ceiling. It's a rare move from risk management to the chief executive's suite, but risk management skills combined with marketing savvy can make claims reduction a corporate asset. That helped Paul Karvois move up to the top spot at the fast-growing motor freight carrier Jevic Transportation Co

Risk & Insurance, Oct 15, 2004 by Patricia Vowinkel

It's a rare risk executive who can break out and take the driver's seat as CEO at a major company. But that's just what Paul Karvois did at Jevic Transportation.

Karvois joined Jevic, a motor carrier, in 1992 as director of insurance. Eight years later, he was CEO. Since he joined Jevic, the company's revenues have grown tenfold.

But then, Karvois was not your typical risk manager. He owes much of his experience to the hands-on learning he received on the job, and many of his innovations have come from talking with workers on the front lines. That allowed him to not only reduce claims, but also to market Jevic, a less-than-truckload (LTL) carrier, as a safer, more reliable company.

"The key to any risk management job is getting out with the front line people," the 50-year-old Karvois says.

Risk managers, according to a recent survey, commonly have worked in the insurance industry before becoming risk managers, and once in risk management, they tend to stay put. An April survey of 30 successful risk executives by Marsh & McLennan found that participants worked as risk managers for an average of 16 years, and that 70 percent had worked in the field for more than 21 years.

Karvois, on the other hand, never worked in the insurance industry before becoming a risk manager. In contrast to many of his peers who earn an MBA and then work toward their CRM or ARM designations, he earned a degree in zoology. He went through a broad-based management-training program while with a large LTL motor carrier. He then worked for many years at family-owned LTL motor carriers, where he gained hands-on experience in everything from sales and marketing to operations and finance.

MOVING ON, MOVING UP

At Jevic, he spent about a year in insurance and risk management before moving quickly up the corporate ladder. He became president in 1997, just five years after joining the company. In 2000, he became CEO.

Today, Delanco, N.J.-based Jevic is a $400-million LTL motor carrier, a subsidiary of SCS Transportation, which was spun off from Yellow Corp. But in 1992 when Karvois joined Jevic, the company was family-owned and a relative newcomer in the industry. The company had revenues of just about $40 million. Jevic was so new and small when Karvois joined that it lacked an insurance, risk management and human resources department.

"It became my role to pull all that stuff together," he says. He stepped in as director of insurance and within six months had created a risk management department. In his year in insurance and risk management, he slashed insurance and risk costs by 20 percent to 50 percent--and at a $40 million company, that did not go unnoticed.

"In many jobs, and that included this one, many times there's broad latitude in what you can do if you are willing to step up and grab it," Karvois says. "I was afforded the latitude to manage insurance as broadly as was necessary to benefit the organization."

How did he do it?

Karvois started by assessing the company's situation and then got out of his office to talk with employees and customers about how to make the company safer, improve customer service and avoid claims. The hands-on experience he had gained at smaller companies helped him understand how claims and losses can affect a business.

"On a practical basis, at a small company--the raider $50-million companies--it's very hands on, you see the cash flow impacts, the P&L impacts and so that gave a real hands-on tutorial in what that meant in real dollars, what the impact is on the company and how those costs stop you from making other investments," be says.

CREATING AN EDGE BY REDUCING RISK

Karvois is quick to acknowledge that he did not do it alone and that he depended on a lot of people who pulled together as a team. "A risk manager can't be successful unless the folks in operations are willing to cooperate, unless the folks in maintenance are willing to cooperate," he says.

Talking with employees and customers, he began to see opportunities to improve safety and reduce damage to customers' goods. Those conversations led to some interesting discoveries.

He and his team found that most of the company's slip-and-fall accidents took place when drivers stood behind their tractors on slippery steel in rainy and icy conditions to hook up the controls for their trailers. After a bit of trial and error, he and his team put in aluminum catwalks that have virtually eliminated slips and falls. They also reduced damage to customers' freight by installing a system of tracks inside the trailers to improve cargo stabilization.

"What that allows us to do is deliver our freight intact for our customers, so it increases our reliability and, at the same time, I don't have drivers and dock folks hurting themselves trying to deal with freight that's not loaded properly," Karvois says. "It came up as an opportunity to reduce the exposure we had on cargo damage."

Jevic's ratio of damage to customer goods is three times better than the industry average, in part as a result of that measure. "We became the industry leader as a result of that," he says.