Closing the Gap between “standards”

The archetype Drifting Goals uses a central concept of a gap between two different standards, ethical, safety, academic etc.  If the gap is large or increasing, some effort will be made to close the gap so that the normal business can continue.

The initial situation looks like this, where the Y  axis is the “standard”.

Clearly, there is a gap between the standards  and one of two things can happen

We lower our standards to meet theirs. ” this is the way you do business in ….  (insert name of country)”

The alternative is:

Where some action is taken to lift a lower standard.

In the case of the RBA subsidiaries, it would appear that the Australian standard has been lowered. However, for those who find the first alternative  repulsive, it is worth considering the difficulty of achieving the second.

How corruption creeps into the Reserve Bank of Australia.

We watched in horror as reserve bank Glen Stevens admits that senior bank officials may have known about the bribery of overseas officials and ask ourselves “How did this happen?” and “How far does it extend?”

The answer to the first question is “ Possible fairly easily and insidiously.” The way in which this kind of corruption grows is described in the systems archetype called “Drifting Goals”  which is shown in the causal loop diagram below.

As the gap between our way of doing business increases, so does the pressure to lower the ethical standards. (The S at the end of the causal arrow indicates that these two variables move in the same direction). As this pressure goes up, the ethical standards are likely go down. ( Moving in the opposite direction, indicated by an O). As the ethical standards go down, the gap closes and business can proceed. The difficulty  is that with causal diagrams, you keep going round and round. As a consequence, the ethical standards of an organisation decline over time. It starts with something small and ends up with a banking scandal.

You can find good descriptions of this at this website



Why Taxi drivers uses taxi clubs for insurance

Recent commentary in the press and on television indicates that taxi drivers and owners are seeking to reduce the costs of operations by using so-called “taxi clubs”. These taxi clubs offer heavily discounted insurance policies to taxi drivers. However, their track record in paying out policies is not good. As a result of the failure of the taxicabs to provide good insurance cover, it is suggested that many taxi drivers are now driving without insurance.

The causal loop diagram below shows the dynamics of the situation and the detrimental effect on the industry.

As the number of taxis increases the use of taxi clubs to minimise Insurance costs will increase. This is indicated by the S at the end of the arrow meaning  that as  the number of taxis increases, use of clubs also increases.  The short-term impact of this is that costs go down  (indicated by the O at the end of the arrow) and the profitability of individual taxi drivers goes up.

However, the long-term effect is  that there is an increasing number of failed claims and this increases the costs to the taxi driver often to the point where they are bankrupt by the cost of insurance claims and are forced to leave the industry. The likely consequence of this is an increasing number of marginally profitable taxis driving without insurance.

There are four immediate policy levers. The first is legislation to require comprehensive insurance as part of the conditions for holding a licence.  The second is not to increase the number of taxis to the point were impinges on profitability. The third is to increase taxi fares to a point where owners and drivers do not resort to shady insurance deals to contain costs. The fourth is regulation of the taxi clubs.