The Pitfalls of a Competitive Organizational Culture

The workplace tends to be a competitive place by default.

In moderation, competition is a good thing. It motivates people to set goals and strive to meet them. It breeds innovation and creativity. It can even go hand in hand with collaboration. In fact, internal competition over promotions, bonuses, or recognition may be built in to your organizational structure.

When this competition turns toxic, however, it poisons workplace culture, resulting in stressed-out employees, lower productivity numbers, and, as a result, lower profits.

Competition might be the backbone of your industry, but it shouldn’t be the number one value in your company — and it shouldn’t be the primary way your employees interact with each other.

Here’s why.

It Puts the Individual Over the Team

Competition pits employees against each other as individuals, putting teamwork in the back seat. If employees are ranked or assessed against each other in performance, they will begin to see one-upping each other as the goal — rather than the project at hand.

Setting a sales target or overall productivity benchmark doesn’t necessarily cause the problem, but when incentives are attached to these goals, employees instantly become divided into winners and losers.

Stanford organizational behavior professors Jeffrey Pfeffer and Robert Sutton explore the problems with what they call the “zero-sum game” of internal competition in their book, The Knowing-Doing Gap: How Smart Companies Turn Knowledge Into Action.

During their research, they found “case after case where the costs of such individual victories were borne by those people, groups, and units that lost the contests. And these internal competitions didn't just harm the losers. They harmed everyone who had a stake in the organization.”

In short, everyone loses when there’s too much internal competition.

It Breeds a Lack of Trust

Good teamwork is built on a foundation of trust.

The American Management Association suggests, “When people work together in an atmosphere of trust and accountability toward a common goal, they put aside turf issues and politics and focus on the tasks to be done.”

But when employees are only thinking about themselves and how they can get ahead, they’re less likely to share information with and trust their coworkers. They’re also less likely to put a common goal in front of their own interests.

In an extreme example of this environment, politics and turf issues take center stage. Employees see every action by their coworkers as either subterfuge or sabotage. People accuse each other of hidden agendas or find ways to take each other down.

It Creates Unhappy, Unproductive Employees

Highly competitive workplaces create stressed-out employees, low morale, and high turnover. It can also make people less productive.

Iwan Barankay, a management professor at Wharton, studied the influence of workplace rankings on employees recruited on Amazon.com’s crowdsourcing platform, Mechanical Turk.

Barankay told Knowledge@Wharton, “Workers can become complacent and de-motivated. People who rank highly think, ‘I am already number one, so why try harder?’ And people who are far behind can become depressed about their work and give up.”

Competitive workplaces also produce constantly shifting hierarchies among employees, which has a psychological toll, even on top performers.

Melanie Greenberg, clinical and health psychologist, writes in Psychology Today, “Constantly having to protect your position and territory against competitors can take a toll on the body and mind.”

When your employees are unhappy, their work suffers, and so does your bottom line. Studies have consistently shown that companies with happy workers post higher earnings.

Competition is one way to motivate your employees to go the extra mile. But a cutthroat organizational culture that thrives on pitting coworkers comes at a much larger expense, ranging from stressed-out employees to financial losses.

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