“We are competitive here,” said a senior executive of a consumer goods firm, describing the culture of competition among managers and employees of the company. He nonchalantly said it with a sense of pride, as if competitiveness is a natural trait that companies should have.
Why not? Competition is in our nature. We compete against each other as individuals or with other teams in sports. We compete with siblings for our parents’ attention. We compete with students in school to land the top awards. We compete with our peers for the best jobs. We compete against other firms for market share. Competition is ingrained in our mindset.
That’s why internal competition, that which pits employees against each other, is the norm in many companies. Several chief executive officers and business owners have subscribed to visibly fostering internal competition. Employees compete with coworkers for the boss’ attention and a promotion. Departments compete against each other, from the mundane team building contests to generating the most company revenue. The traditional performance evaluation of employees is built to forcerank the performers and non-performers into a bell curve; hence, promoting competition among workers and even management level. Business leaders put a premium in internal competition and believe that competition strengthens the organization.
Corporate giants became textbook models of building a competitive culture in organizations. At one time, Goldman Sachs & Co. selected 500 out of 35,000 employees to be promoted as partners, with the rest being weeded out in the process. General Electric periodically asked managers to force rank their subordinates and then fire the bottom 10 percent. Many of the large companies in the Philippines patterned their competitive cultures after these poster US companies.
But in this day and age where millennials and Generation Z employees comprise more than 60 percent in most organizations, internal competition is more of a boon than a bane. Bodies of evidence suggests that it generates more morale issues than any productivity gains; and the cost in both human and financial capital is high.
On a department level, internal competition among various departments in an organization building silos. This results in keeping information the departmental silos themselves, minimizing if not, preventing any form of sharing.
But how do they end up like these? It starts when managers compete with each other. Employees mirror this behavior from their managers, and develop loyalty to the group or manager. Even the benign practices of Philippine-based companies such as holding Christmas party group performances and departmental team-building activities, reinforce the culture of competitiveness, henceforth further strengthening the silos. As silos solidify like concrete, employees become more exclusive and insular, distrusting others from groups or departments. Cynicism and resentment develop as members in a silo reject outsiders, withholding information and cooperation. This is where a kind of mindset sets in like a hard-to-remove plaque inside the organization.
On the individual employee level, internal competition among employees breeds protection of individual interests rather than collaborating with each other. This behaviour exacts a great cost from the organization such as lack of teamwork, flaring up of conflicts, confusion, dissipation of morale, departure of good people leaving, and stifling of creativity and innovation. Finally, operations slow down, costs go up, and profitability suffers.
That’s why much of the global companies have realized that internal competition undermines collaboration, a critical skill among employees in the Fourth Industrial Revolution. In fact, these companies, such as Adobe, Dell, Microsoft, IBM, Deloitte and Accenture have long scrapped the traditional performance evaluation and replaced with frequent and timely feedback from managers, and collaboration across departments.
Breaking down internal competition also means tearing apart departmental silos, which fosters communication and collaboration across the organization.
Competition is now being replaced with collaboration. This is where two or more people or organizations work together to realize or achieve a goal or project successfully; and new studies reveal that collaboration drives workplace performance. A collaborative workplace and behavior among employees result in higher engagement levels with employees, lower fatigue levels, and higher success rate of projects.
Collaboration also promotes a feedback culture, one where performance evaluation is
replaced with performance feedback. This is where employees receive timely feedback from their managers on an ongoing basis following assignments; hence, building alignment and trust that is needed to energize and empower their teams.
All these do not mean that being competitive is bad, it should just be healthy competition. Competing against yourself, that is, constantly outdoing your performance by doing better every time, is healthy competition. External competition that is, competing against other companies, is all good as long as the customers benefit with better services and cost. But in the end, collaboration should trump competition.
The author is the chief executive officer of Hungry Workhorse Consulting, a digital and culture transformation consulting firm. He teaches strategic management in the MBA Program of De La Salle University. The author may be emailed at rey.lugtu@hungryworkhorse.com.