The Hidden Cost of Internal Competition

The right place for competition is the marketplace, and the wrong place is the workplace. Put simply, the same behavior that can create value externally can cost a company big-time internally. Competition is kind of like ozone. Ozone benefits us by reducing the sun's harmful ultraviolet rays outside the Earth's atmosphere. But inside the atmosphere, ozone wreaks havoc by creating air pollution and damaging our lungs. Similarly, competition damages our businesses when it manifests internally and with business partners. So when it comes to competition, the trick is to avoid confusing outside with inside. This means leaders must understand when and how to morph from competitors to collaborators. Bringing to market better, faster, thinner, greener products involves competition. But the second we begin competing with team members and business partners, we lose value. Consider this scenario. Your company's flagship product is suddenly under siege, because a venture-backed startup with disruptive technology has just signed deals with two of your largest customers. Sales, marketing, and engineering come together for a white board strategy session. The immediate objective is to stop the customer defections. Should there be competition in this situation? Absolutely. The company's survival is at stake! But competition must be externally focused. The Blame GameIt's exactly this sort of crisis that breeds internal competition. Many team members focus on which function, team, or person deserves blame. Some "star" players struggle to appear that they've saved the day. Jostling for position, finger-pointing at another function or department, developing solutions without engaging key stakeholders are manifestations of internal competition. They distract our companies from the business at hand, compromise agility, and reduce value. The more effective response is to collaboratively develop solutions. Despite the hit to the balance sheet, many companies foster and encourage internal competition in the mistaken belief that all competition is good competition and that the cream rises to the top. For these companies, competing with colleagues is ingrained in organizational culture. Worse yet, competition is often institutionalized in company procedures. Some companies embrace a star culture in which individuals are recognized and rewarded for achieving more than their colleagues. Some companies compensate and promote managers only for their own accomplishments rather than for developing the abilities of team members. Still, some companies "rank and yank" team members and regularly eliminate the bottom-performing 5% of the workforce. These practices pit employees against one another and force team members to spend more time, energy, and focus competing with colleagues. What's lost is the motivation to work collaboratively in innovating processes, retaining and acquiring customers, and developing products and services. Reducing Internal CompetitionInternal competition is a double-whammy. No. 1, internal competition compromises value by distracting the workforce and forcing people to focus on the wrong things. To compound that loss of value, internal competition also prevents companies from creating value through collaboration. Perhaps the most significant way that internal competition derails collaboration involves trust. How can we trust one another if we're competing in a dog-eat-dog culture? Instead of trust, fear prevails. Another way that internal competition short-circuits collaboration involves information hoarding. Achieving within an internally-competitive culture requires an "it's my stuff" attitude about data and information. This attitude complicates collaboration, because collaboration requires sharing. Companies in industries ranging from transportation to consumer products chalk up substantial results by curbing internal competition. That value includes eliminating redundancy, reducing product development time and enhancing customer satisfaction. Rather than compete for job retention in a challenging economy, mechanics at American Airlines have collaborated to maintain full employment and make their function a profit center. Facing competition from foreign maintenance companies, American has cut the time and number of mechanics needed for major overhauls. This has freed the mechanics to take on additional work from other airlines and air freight companies. Essentially, the mechanics have collaborated across functions and have reduced internal competition to retain jobs and create new business opportunities. So how can you as a leader reduce internal competition? Here are 5 ways: Reward People for Sharing Data and Information Sharing data and information internally creates value by harnessing resources across the organization. Sales and marketing teams can avoid redundant client contacts, and product development teams can avoid duplication of efforts. Therefore, annual salary reviews should include an evaluation of how team members share data and information to create organizational value. Avoid Pitting People Against Each Other Some companies create internal competition by giving two or more team members the same assignment and rewarding the person who does the best work. Instead, harness complementary skills by encouraging cross-functional teams to meet challenges. Recognize People for Gaining Broad Input Successful collaborative organizations create value by recognizing leaders for gaining broad input into decisions. When leaders make decisions in a vacuum, the organization suffers. Worse yet, some managers make shoot-from-the-hip decisions without analyzing adequate data and information and without input from others. The organization benefits when people participate in decisions regardless of level, role or region. Change the Conversation Language is a powerful component of organizational culture. Too often, shop talk includes sports metaphors and internally-competitive language. As a leader, encourage your team to change the conversation and embrace collaborative language. In a collaborative organization, you should hear language like: "Let's get input from sales" or "We can make a better decision if we engage finance to run the numbers" or "Let's connect now with corporate communications to see how different approaches to solving this problem will affect our reputation." Clarify Role of Competition Team members need to know when to compete and when to collaborate. Educate your workforce that competition belongs in the marketplace rather than in the workplace.

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