Textbook Chapter 4 Opening Case: The unintended consequences of rewards when incentives backfire What gets rewarded gets repeated John E Jones (American lawyer and jurist from Pennsylvania) A good example of the complexity of organisational incentives comes from the Chilean city Santiago a city of six million people. The bus system in Santiago de Chile was voted the citys worst public service in 2003. The bus routes were very long and inefficient and the treatment of passengers was poor. On top of all this, the level of noise and environmental pollution was high due to poor maintenance of petrol engines, as was the rate of accidents due to both careless driving and brake failure. Two systems of bus driver compensation exist in Santiago. Most drivers are paid per passenger transported, while a second system compensates drivers with a fixed wage. For the drivers whose wages depended on the number of fares sold, there was fierce competition for passengers. Although this incentive system did motivate drivers to begin their route on time, take shorter breaks and drive efficiently, it also had serious unintended consequences. Drivers being paid per passenger were incentivised to compete at street level with other buses, even those from the same company. This resulted in dangerous races to busy stops, waiting for a red light in congested areas to prolong the stay at a busy junction (as buses could be boarded anywhere) or driving past stops with only a few passengers waiting and refusing schoolchildren altogether (they paid only one-third of the adult fare)! Studies reported that Santiagos transit buses caused one fatal accident every three days and that drivers paid per passenger caused twice as many traffic accidents as drivers paid per hour. On the other hand, a typical bus passenger in Santiago waited roughly 10 per cent longer for a bus on a fixed-wage route compared with an incentive-contract route. Santiago now pays drivers partly by the distance travelled. Unfortunately, these drivers are no longer motivated to ensure that passengers pay the fare (about one-third are freeloaders) and drivers will pocket money paid by passengers who are willing to pay a lower fare in return for not having aticket!

1 Reflecting on the Santiago Bus experience of incentives:

a What was the leadership trying to achieve in setting up the incentives system of pay?

b what have the incentives taught drivers about their role?

2 What alternative measure can you imagine that you could put to the leaders of the bus company to develop a better sense in the drivers of what it is to be a good bus driver?

300 words please make it quick thankyou