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Excerpt from Leadership and The Customer Revolution.

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Excerpt from the book Leadership and the Customer Revolution, by Gary Heil, Tom Parker and Rick Tate...

COMPETITIVELY DISADVANTAGED:

BUILDING COOPERATION
INSTEAD OF INTERNAL COMPETITION

We act competitively because we are taught to do so, because everyone around us does so, because it never occurs to us not to do so, and because success in our culture seems to demand that we do so.

-Alfie Kohn, No Contest

Are they (the people in your company) thinking more about customers or employees? About competitors in the marketplace or competitors in the hallways? About products or protocol?

-Davis and Davidson, 20/20 Vision

Teamwork. We're all for it! Many of us have taken part in expensive team-building exercises where we've climbed rope ladders, built boats, gone on challenging photo safaris, faced mythical enemies, and solved mysteries. Over and over, we've been told we have to learn to work together more effectively. And for good reason. Today's world is too complex for any one person to manage the value proposition alone. This is particularly the case in companies where individuals from different functional areas, departments, and physical locations have to work in harmony to meet the unique needs of their customers. If we hope to succeed, there is, in fact, no real alternative for many of us but to work as a team, to cooperate.

Unfortunately, it is this alternative that most organizations are least well equipped to implement. We are simply not prepared to cooperate-culturally, structurally, or philosophically. We are, after all, a nation that makes heroes of individuals who distinguish themselves competitively. From corporate raiders to rock stars, from baseball's Most Valuable Player to the most famous heart surgeon, we've focused on individual winners. Looking out for #1 is not only expected, but rewarded.

Nowhere is winning (and losing) more a part of everyday life than in our organizations. Here, the thrill of victory or the agony of defeat is relived by many on an almost daily basis. Unfortunately, the primary field of battle may not be in the marketplace, but in our hallways. The arena where the most intense competition in business is often waged is within the corporation itself, among its employees. The costs of unnecessary internal competition are prohibitive in most organizations.

We talk about being part of a team but, instead of cooperating in a system that encourages teamwork, we are pitted against one another to compete and win as individuals. As much as we claim we want cooperation, most of our structures don't reward it, our corporate culture doesn't support it, and our leaders are reluctant to embrace it-though it is often in the best interests of the organization to do so. Our people return from their team-building weekends and, within a few days' (hours'?) time, they're often back to building their empires at the expense of the other person and with the hope of a superior (i.e., winning) performance appraisal, higher merit pay, the next promotion, or more job security. To meet today's demands we need to be pulling together, yet the internal competition endemic to our system is undermining our efforts.

In Spite of the System

We're not saying that cooperation doesn't exist in most organizations. In fact, cooperation can and often does prevail. People frequently act on their more noble instincts and help one another. Indeed, it is nothing less than amazing that, given the systemic promotion of competition and the resistance to cooperation, there is as much pulling together as there is. It seems that individuals are genuinely driven to do the "right thing"-contributing to the overall good of the organization-rather than feathering their own nest. But the cards in many organizations are essentially stacked against it. There are simply too many barriers to acting decently and cooperatively and, conversely, too many rewards for acting otherwise. If our structure required teamwork, most people would readily cooperate without a library of team-building exercises. The task itself would create a cause to rally around.

Avoiding A Scarcity Mentality

Old-culture Americans... find it difficult to enjoy anything they themselves have unless they can be sure that there are people to whom this pleasure is denied... Since the society rests on scarcity assumptions, involvement in it has always meant competitive involvement.

-Philip Slater, The Pursuit of Loneliness

It has been a while in coming, but the jury has mostly decided in the case of Cooperation vs. Competition within the organization. While a few arguments may be made for internal competition being effective over the short term to gain a certain sought-for result or to encourage the performance of simple tasks, the overwhelming body of current research points to the fact that it's cooperation, not internal competition, that promotes higher achievement. A number of these studies also indicate that the competitive environments in which people are the least productive are those where rewards are limited, and where winning by a few necessitates losing by many. In environments where wins are in short supply and losses are the rule, not the exception, a scarcity mentality develops. Unfortunately, it is environments such as these that are the most prevalent in many organizations.

We've all seen how a scarcity mentality plays itself out in the larger world. Individuals or small groups scramble for whatever is in scarce supply. Whenever they find what it is they are looking for, they hoard it and do whatever else is necessary to protect it. The fear that the scarcity will persist robs them of the inclination to share what they need. Often, values are perverted, and the individual forsakes a larger sense of community.

Divisionary Divisions

We'd been involved with a company that had come a long way in improving the level of service and internal cooperation until it decided to give a Division of the Year award to the division that was most progressive in customer service. Within days of the announcement of the award, cooperation among divisions began to disappear. People started hoarding information and refusing to share resources. It was no longer "we." Instead, it became "us" and "them." Getting the highest score, not improving service to customers, became the most important goal.

The organization whose employees must compete for a limited number of wins or rewards-whether it's membership in the President's Circle or the prize for Employee of the Month-tends to create a scarcity mentality of its own, complete with the same scrambling, the same hoarding, the same subversion of potential values, and the same failure to consider the greater good. The principal difference in the type of scarcity that exists in world markets-shortages of food or medicine, for example-and that which exists in the corporation is that the former is real while the latter is artificially created. Organizational structures such as forced distribution performance appraisal or programs such as sales and service contests get people to compete against one another-a few people win at the expense of others. Ironically, what is scarce and often bitterly fought for in the corporation is not even necessarily something that has real value in the outside world-the boss' praise, for example.

If a scarcity mentality exists in an organization and if employees compete for a limited number of wins, the chances are good that many people will be more focused on the competition and the reward than on their work. In any event, it is far less likely that they'll cooperate with one another any more than they have to, and far more likely that much of their energy will be consumed in the campaign for whatever individual rewards are available.

Of course, this wasn't our intent when we first put these various limited-win structures into place. On the contrary, we had hoped the competition would spur better performance and stimulate creativity. Originally, the goal may have been to increase sales, so we implemented a commission structure, then organized a Quota Club for our top performers. Or, if the goal was to improve service, we decided to "pay for performance," limiting the number of dollars available in any department. The competitive culture that these incentives, elite clubs, compensation structures, and other limited-win programs have spawned, however, often has a negative, less visible effect on performance. The structures that invite internal competition are undermining the cooperation and teamwork that we all desperately need to add value and create loyal customers. Most of us grew up in competitive environments, therefore, we do not always see what should be obvious to us by now: instead of adding value, internal competition, particularly when coupled with a scarcity of wins, subtracts significant value in most organizations.

Publish or Perish?

On a recent flight, we spoke to a well-known research scientist who, not long before, had synthesized a drug that eased the suffering of AIDS patients. He told us that developments in his field were considerably slowed by decisions surrounding whose names would appear, and in what order, in the medical journal articles. He suggested that new drugs would get to market faster if the researchers' names were eliminated altogether, but that would be difficult because publication credits are a key indicator of personal success.

The question is, Why do we do it? Why do we limit the number of people who can win? Are there great payoffs for the distinctions we make? What are the potential downside risks? Here are eight, for starters. There are many, many more.

  1. Internal competition drives out creativity and innovation. Individuals competing against one another must be playing the same, or similar, game so that the appropriate comparisons can be made and the winners selected. Spawned by competition, this need for similarity makes it more difficult for the individual competitor to experiment and try new methods. The result can be significantly lower levels of creativity and innovation.
  2. Internal competition inhibits dialogue.  Add the concept of winning and losing to a dialogue and you get a debate. In an internally competitive environment, individuals become less interested in sharing and thinking about new or conflicting information and become more concerned with scoring points or pressing their case, right or wrong. After all, in a competition, winning is the name of the game.
  3. Internal competition impacts relationships negatively. Though many of us naturally expect the best from people, when we know we are competing-whether for a promotion, to curry favor with the boss, or to get a bonus-it is difficult for us to build trust, work as a team member, or create an honest relationship. This is especially so when wins are limited, and your victory is made possible by the failure of others. In any event, competition makes people suspicious of one another, and often results in greater anxiety in workers, who constantly feel they have to watch their backs.
  4. Internal competition lowers product and service quality. As different individuals and different departments compete among themselves while trying to get products and services out as quickly and profitably as possible, the temptation can be to cut corners, particularly if the problems created in doing so won't come back to haunt the company for years, long after the individuals involved have moved on.
  5. Internal competition destroys focus. Winning and improvement are very different goals. When we focus on besting others, we are not necessarily focusing on improving the present system. In fact, there is significant evidence demonstrating that winning can actually result in lower levels of performance. When people compete with a focus on winning, they often take the fastest, most reliable, most predictable route to winning, which is rarely the most effective route to continually improving the method of work!
  6. Internal competitiveness reduces efficiency. When individuals are less innovative, less creative, less trusting, or more combative, it costs the company in a variety of ways. For example, when people compete with one another, they tend to work independently, often duplicating the efforts of others, solving problems that have already been solved, generating data for projects for which perfectly good data already exists.
  7. Internal competition demotivates the non-winners. The theory was that if people competed and the winners were rewarded, they would feel appreciated and all those who didn't win would strive to do so in the future. In most cases, however, it hasn't worked out that way. Far too many artless and incomplete reward systems result in the selection of "winners" whose performance was not any better, and was sometimes objectively worse, than that of some of the "losers." Predictably, this can be demotivating to those who "lost." Precisely how demotivating is hard to tell, because we usually evaluate the motivational effectiveness (or ineffectiveness) of our efforts by tracking the reaction of the winners rather than that of the non-winners. Instead, we simply assume that non-winners are generally satisfied, and that they'll try harder next time. In fact, the opposite often occurs. Once people are labeled non-winners or feel the deck is stacked against them, they sometimes stop trying altogether-and who can blame them?
  8. Internal competition lessens self-esteem. When some people lose (or at least are labeled non-winners) in the competition, they begin to question their ability to succeed in this (and maybe any other) system. After all, they worked hard, tried their best, and came up short. Losing is more common than winning because of the way the system has been designed: i.e., to make sure that most people don't win. The long-term effect of constantly coming up short can be significant. Less confident people simply don't learn or experiment as effectively as those who are confident.

Having read this far, if you still think that the same argument can be made for competition that Winston Churchill made for democracy (i.e., that democracy is the worst form of government... except for all the others), please reconsider. Current research suggests otherwise. Internal competition, particularly when wins are limited and cooperation is required, has hidden costs we've only begun to realize.

65 studies found that cooperation promotes higher achievement than competition, 8 found the reverse, and 36 found no statistically significant difference. Cooperation promoted higher achievement than independent work in 108 studies, while 6 found the reverse and 42 found no difference.  The superiority of cooperation held for all subject areas and all age groups.

-Alfie Kohn, No Contest

Building Cooperation

Fortunately, there are a number of ways to break the hold that internal competition may have on our organizations:

  • Increase the interactions between individuals and groups. The faceless person in another office performing another function can easily be ignored. It's far harder not to cooperate with people you know, especially if your interaction with them is frequent and you have to cooperate to get the job done.
  • Ensure that everyone has the opportunity to win. This doesn't mean rewarding non-performers. However, when a number of people seek the same goal and the number of wins is artificially limited, competition will result. If everyone can win, one person's success doesn't necessitate another's failure.
  • Establish cooperation and respect as core values. As long as internal cooperation is perceived to be optional and internal competition is tolerated, little will change. Elevating cooperation to a core value will ensure that climbing someone else's back to get ahead will be career-limiting. Take a few minutes to analyze whether cooperation is career-enhancing in your organization. How do you know whether people are cooperating effectively or not? Do you understand the effects of the structures that promote competition? Do your human resource practices encourage teamwork or individual excellence? What happens to people in the organization who play politics at the expense of others?
  • Recognize teamwork, appreciate cooperation, improve recognition abilities. The more symbolically, visibly, and frequently we demonstrate appreciation for teamwork and interdepartmental cooperation, the more of it we'll get.
  • Educate everyone about the entire process. If people understand how their performance affects others, they will be less likely to act in ways that negatively impact others or the company. Most people want to do the right thing and, given a choice, will make a good decision unless it is personally punishing. Providing information about the process enables each person to make an informed choice.
  • Beware of quick rotations. A focus on short-term results often leads to a less cooperative environment. If a person has only a short time in which to impress the boss or make an impact, the long-term benefits of cooperation can be perceived to be less important. This is especially true if a person will be rotated before he or she will experience the negative effects of non-cooperation. Clearly, in the fast-paced world in which we compete, most jobs don't last long and quick job rotations are necessarily the rule. In these cases, it's even more important to ensure that internal competition is limited and that accountability for cooperation is significant. If part of everyone's evaluation included an analysis of what a person or group has done to further teamwork, most organizations would be very different. Whom have you helped lately? From whom have you learned? Whom have you taught? What group has influenced your thinking the most? Which people, outside your group, have been the most instrumental in helping you succeed?
  • Involve everyone in at least one cross-functional improvement effort. Mandating that people must work beyond the boundaries of their own department or functional area will not only result in more talent being applied to complicated process issues, but will result in a greater appreciation of how the entire process works to benefit the customer. One of the most important reasons for mandating participation may be symbolic, showing people that cooperation is not optional and that everyone will actively participate. People should also be held accountable for their participation. There's no greater waste of time than to be a mandated team member on a team that accomplishes very little.
  • Consider teams as the primary unit of responsibility. Design in interdependence. It hardly makes sense for several members on the team to be able to win when the team as a whole loses and when the customer is shortchanged. If a task requires teamwork, ensure that teamwork is required of everyone. Make the team responsible and accountable. Beware: As some organizations have begun to organize in teams, many have been unwilling to completely abandon the old structure, keeping team members accountable as individuals to their former functional department. The result is usually a group that does not function as a team but as individuals representing an area of expertise, each with veto power over most decisions. Frustration levels tend to be high as people are torn between functional responsibilities and group commitments. If we want teams to act like teams, we must make them cohesive units, with a real task and knee-knocking team accountability. Going halfway can be very costly.

2001, 2002 Innovative Thinking, Inc., All rights reserved!

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