Network Rail learning the ropes

The difference in reaction over the Network Rail bonus row between last year and this year. Last year, Philip Hammond railed from the sidelines and was basically ignored by Network Rail [thanks to MatthewDurbin for the correction]. This time, Justine Greening, threatening to turn up to a meeting of the members, seems to have sent Network Rail into a panic. I thought initially it was a bit of a naive gesture on her part, and I’m still not sure she understands the ins and outs of the government’s relationship with Network Rail, but certainly her move elicited a different reaction.

By cancelling their meeting, Network Rail’s directors have shown a lot more nous than last year. They seem to realise what side their bread is buttered on. However, none of this resolves the issue of bonuses, which is a blight on the industry – people on six figure salaries do not need bonuses to do their job properly. NR is not a capiatlist go-getting company dependant on entrepreneurial skills, but a boring utility which needs to do the same things day after day efficiently. In any case, who on earth needs these mega salaries anyway? What on earth do they do with the money once mortgage is paid off, kids schooled and holidays taken?

  • The Fact Compiler

    Hold on a minute!

    Yes, last years executive bonuses were also caped.

    But by Huggable Higgins:

    http://railwayeye.blogspot.com/2011/03/huggable-ditches-2010-11-exec-bonuses.html

    So it doesn’t appear to matter which “here today, gone tomorrow Minister” was in charge.

    Suffice to say that David Higgins has now declined annual bonuses on his Board’s behalf twice!

    For the sake of the railway we can only hope his fellow Board members, no doubt now in high dudgeon, don’t decide to vote him off.

    That would be a real Pyrrhic victory for the ladies Eagle and Greening.

  • Timing is everything in the entertainment business and It does read rather oddly in some reports that The Board had already decided to forego their bonuses before the bonuses were announced but somehow managed to have a wavering moment before making the announcement, in which time the whole farrago took off.  Surely a statement, timed to be near synchronous with the bonus announcement would have saved all this fuss, and an interesting nuance – either in the reporting or the actual Ministerial statement the Board forewent their bonuses, but the word forfeit seems to have crept in to the report somehow. A case perhaps of bad timing for the delivery of the lines.

  • Tony W

    The legislation that set up Network Rail intended that strategy be determined by Government and once instructed then NR, as infrastructure owners and managers, would get on with it. In practice NR seem to swagger around forcing their ‘expertise’ on all and sundry. Why, for instance, were they, rather than transport planners, commissioned to evaluate the alternatives to HS2 ?  Income to NR seems to be mainly the money from TOCs appointed by DfT through the franchise competition arranged by DfT.
    Yes Network Rail’s is difficult infrastructure, but do County Council infrastructure managers (roads are also tricky) have bonuses ?

  • “What on earth do they do with the money once mortgage is paid off, kids schooled and holidays taken?”

    They buy Highland sporting estates on the Argyll coast, don’t they?

  • Boldfield

    Heres part of an interesting artical on boauses from the New Scientist.

    Editorial:
    “The bonus pay paradox”

     

    If you want
    to boost people’s performance, don’t bank on bonuses

     

    BONUS
    culture has come under intense scrutiny since the ongoing financial crisis
    began in 2007. Many people have been outraged by the way some bankers and top
    executives seem to have been rewarded for failure. Others find the idea of
    multimillion‑dollar bonuses morally abhorrent. Even US President Barack Obama
    has gone as far as to call large bonuses “obscene”.

     

    But few
    have asked whether performance‑related bonuses really do boost performance. The
    answer seems so obvious that even to ask the question can appear absurd.
    Indeed, despite all the fuss about them, financial incentives continue to be
    introduced in more and more areas, from healthcare and public services to
    teaching and academia.

     

    “Economists
    and workplace consultants regard it as almost unquestioned dogma that people
    are motivated by rewards, so they don’t feel the need to test this,” says
    Alfie Kohn, a teacher turned writer. “It has the status more of religious
    truth than scientific hypothesis.”

     

    So it may
    come as a shock to many to learn that a large and growing body of evidence
    suggests that in many circumstances, paying for results can actually make
    people perform badly, and that the more you pay, the worse they perform.

     

    No one is
    disputing that bonuses can help companies and institutions attract and retain
    the best staff. Nor does anyone deny that you can encourage people to do
    specific tasks by linking payments to those tasks. Rather, the issue is about
    how to get the best out of people. Do employees really perform better if you
    promise to pay them more for getting results?

     

    There are
    some obvious reasons why such payments can backfire. It has been argued, for
    instance, that cash bonuses contributed to the financial crash, because traders
    had little motivation to ensure their companies’ long‑term survival (New
    Scientist, 19 March, p 30).

     

    Most bonus
    schemes are poorly designed, says Malcolm Higgs of the School of Management at
    the University of Southampton in the UK. He thinks the reason is that
    organisations try to keep schemes simple. Nevertheless, he thinks bonus schemes
    can work as long as they align the interests of individual employees with the
    long‑term goals of a business.

     

    Bonuses can
    also encourage cheating (see “The insider’s view”). “Once you
    start making people’s rewards dependent on outcomes rather than behaviours, the
    evidence is people will take the shortest route to those outcomes,” says
    psychologist Edward Deci of the University of Rochester in New York state.

     

    Deci blames
    stock‑option bonuses for the collapse of Enron and other corporate scandals.
    “In many cases the top executives simply lied and cheated to make the
    stock price go up so they got huge bonuses.”

     

    But the
    work of Deci and others suggests the problem with bonuses runs far deeper than
    poor scheme design or cheating. In 1971, he asked students to solve puzzles,
    with some receiving cash prizes for doing well and others getting nothing. Deci
    found those offered cash were less likely to keep working on puzzles after they
    had done enough to get paid.

     

    Two years
    later, a team led by Mark Lepper of Stanford University, California, asked
    children aged between 3 and 5 years old to draw with felt‑tip pens. Some were
    told they would receive a special ribbon as a prize for doing so, and duly
    received it. These children were less likely to choose to draw with felt‑tip
    pens when they were later given a free choice of activities. No such effect was
    seen with children who were not offered a reward, whether they subsequently
    received an unexpected one or not (Journal of Personality and Social
    Psychology, vol 28, p 129).

     

    These
    studies suggest that offering rewards can stop people doing things for the
    sheer joy of it, an idea known as the overjustification effect. This was the
    basis for a series of books by Kohn in which he argues that rewarding children,
    students and workers with grades, incentives and other “bribes” leads
    to inferior work in the long run.

     

    Those who believe
    in the power of bonuses fail to distinguish between intrinsic and extrinsic
    motivation ‑ wanting to do something because you like it in its own right
    versus doing something because you want the reward, Kohn says. “It’s not
    just that these two are different, it’s that they are often inversely related.
    The more you reward people for doing something, the more their intrinsic
    motivation tends to decline.”

     

    A “do
    this and get that” approach might improve performance in the short term,
    but over longer periods it will always fail, Kohn says, as it turns play into
    work and work into drudgery. Bonus recipients inevitably play safe, become less
    creative, collaborate less and feel less valued, he adds.

     

    The
    existence of the overjustification effect has been disputed. However, a 1999
    meta‑analysis by Deci and colleagues of 128 studies strongly suggests it is
    real (Psychological Bulletin, vol 125, p 627). “The facts are absolutely
    clear,” says Deci. “There is no question that in virtually all
    circumstances in which people are doing things in order to get rewards,
    extrinsic tangible rewards undermine intrinsic motivation.”

     

    What’s
    more, the studies suggest that the greater surveillance, evaluation and
    competition that tend to accompany performance‑related rewards further
    undermine intrinsic motivation, and that offering rewards can also stop people
    taking responsibility.

     

    These
    findings suggest that in the kind of jobs many people do as much for love as
    for money ‑ from healthcare to science journalism ‑ any incentives specifically
    tied to performance, as opposed to a normal salary or unanticipated bonuses,
    may backfire. However, this clearly doesn’t apply to someone who gains no
    satisfaction from their job and does it only for the money. “If you are doing
    a boring, stupid task, rewards cannot undermine intrinsic motivation that you
    don’t have,” Deci says.

  • Mark R

    “What on earth do they do with the money once mortgage is paid off, kids schooled and holidays taken?”

    Go for a few train rides, presumably… That’d use it up fairly quickly.

  • Percy

    There’s no real need for bonuses if you consider that most people on the railway are trapped with specialist knowleldge, skills and training that arent transferable or of use elsewhere and also these same people having invested a large amount of their time gaining these skills have no experience of the world outside of the railway industry, hence BR when it was the only game in town got away with paying its ASLEF brothers a mere pitance in comparison to what they get since a Drivers Market was created by establishement of competing companies who are hiring their skills. I would guess this plays out higher up the food chain as well with a lot of railway managers able to choose from a myriad of different companies who all now supply the railway. It used to be that you didnt go near the railway if you wanted purely money, you did it because you liked the job and it was a reasonable job with good terms and conditions, but definatley not highly paid. Things have been somehwat distroted since then and with the taxpayer funding the gravy train its bound to cause question to be asked. 

    Its not going to happen but if tomorrow morning BR existed, cut the wages and said walk if you want to, most railway men and women would have nowhwere to go, their skills, expertise and experience all being deficient for the outside world.

  • Paul Holt

    Attention to formatting would help.

  • Paul Holt

    Or renew their car insurance, a scandal CW has been pointedly silent about.

  • Rik

    Christian, your last sentence doesn’t half reek of jealousy. I was right with your argument until then.

  • Christian Wolmar

    Not in the slightest — I have never equated large amounts of money with happiness. I certainly want enough to be housed, clothed, fed and enjoy nice holidays, but, as Nigel Harris, the editor of Rail, said the other day to me, once you get beyond £100,000 per year, what the hell do you do with it? I have no idea, and no desire to earn megasalaries and I have absolutely no understanding of why any h igh earner would care whether they earn £500k, £1m, or £10m as the extra would not seem to buy any pleasure or happiness – indeed, quite the opposite.

  • Garth

    No, I don’t think most of the present management are sufficiently interested in the railways to do that, compared to the situation that once existed. See Percy’s comment above, which is so true.

  • RB

    “What on earth do they do with the money once mortgage is paid off, kids schooled and holidays taken?”

    They go and buy bigger houses in better neighbourhoods, send their children to better schools and spend their holidays in five star hotels in exotic locations. Ask any rock star.

  • GM

    Totally agree they are public servants, Its like the council awarding themselves multi million pound bonuses because the bins where emptied on time (or nearly on time)  

  • SteveB

    If Network Rail directors receive bonuses, then surely they can be the targets of the fines imposed after, say, a safety breach. This way, at least one part of NR would suffer from the otherwise-pointless exercise of fining the organisation as a whole.

  • Fandroid

    It’s difficult to imagine that these mega-salaries are spent on anything remotely sustainable. More cash consumption must inevitably equate to more carbon consumption. I would love to see a piece in a national daily which explains where all the dosh goes. (5th house/apartment anyone?)

  • Fandroid

    As the New Scientist article highlighted by Boldfield implies, it seems counter-intuitive that you would hire someone whose main motivation is financial reward, when what you want is someone whose overwhelming motivation is to do his/her absolute best for the organisation.  Surely, its the other way around- if I was recruiting such a person, I would strongly mark down anyone who seemed likely to dash off as soon as a better salary/bonus scheme appeared elsewhere  

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