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F.U.N. News Issue #6

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Competition

By Billy Greer

It's a dog eat dog world out there and the business that isn't competitive won't survive for long. What's one of the best weapons available for this corporate warfare? Would you believe . . . cooperation?

Companies generally recognize competition in two arenas, internal and external. Competition between companies, or external competition, is seen as an inevitable part of doing business. Since this is thought to be best for customers, it seems natural to think that competition between employees, or internal competition, will benefit companies.

Promoting internal competition is the idea behind having sales contests, commissions, bonuses, and other systems that reward a few top performers. At face value, the idea seems good. If you have people pushing themselves to win an award, then you will get better performance. In reality, such systems rarely work as planned. With a sales contest for example, it is usually clear early on who will be the winner. That person may then relax and do just enough to stay ahead of everyone else, and the others will quit trying so hard since they don't have a chance. For every winner, there are a lot of losers. As Peters tells us in In Search of Excellence, "Label a man a loser and he'll start acting like one." He recounts an experiment in which a group of adults were each given the same set of 10 problems to solve. When they turned in their answers, half were told they had done well, 7 out of 10 correct, and half were told they did poorly, 7 out of 10 wrong. When the same group was given another set of problems to solve, the half who had been told they did well on the first set did even better on the second set. The half who had been told they did poorly, did worse on the second set. Should a company set up a program based on competition that in effect tells most of its employees that they are losers?

Don't employees work harder when they compete for commissions or bonuses? Ever been to a store with aggressive sales clerks? Familiar with the reputation of used car salesmen? If someone gets pushed into a sale that they regret later, they are not likely to become a repeat customer. It's hard for most companies to maintain their sales volume without repeat customers. If John gets a good lead on a new client that could mean a lot in sales, is he likely to hand off such a plum to Sue? Even if he is too busy to handle the account effectively, he would rather lose the client than let Sue get the credit. This kind of hard work can be detrimental to a company.

Many companies have made changes. Saturn dealers got off to a great start by promising an up-front fair price without pushy salesman trying to score another sale. Many stores promote the fact that their sales clerks are on salary, so they can be trusted to provide service rather than pushing you into a purchase. One big change is the adoption of team strategies. Can team strategies and a lack of internal competition be effective? One approach that most people are familiar with is the process of brainstorming. A group of people gets together to solve a particular problem. They agree that they will suggest any ideas that come to mind, and that the suggestions will be equally valued. In a competitive situation, not only is everyone trying to win by coming up with the best idea, everyone is also afraid of losing by suggesting a bad idea. This causes people to hold back potentially good ideas because they fear others will ridicule them. Brainstorming works because it removes competition and encourages people to be less inhibited in offering suggestions. Since the suggestions are freely shared, an idea by one person may trigger more ideas from another person. You end up with a synergism in which the whole is greater than the sum of the parts. A more concrete example is the old tradition of barn raising. If six families in a community wanted to build barns, they were more effective by all working together to raise one barn at a time, rather than each family working on only its own barn.

The team approach encourages the free flow of information and the sharing of strengths and abilities among the group members. A supportive atmosphere also contributes to much less stress and more job satisfaction. The result can be much better productivity and effectiveness than under traditional non-cooperative arrangements. When Ford designed the Taurus, it used a team approach. In the past, sales and marketing people might want certain features in a car. Engineering had to figure out how to add those features or say they weren't feasible. Production had to work with the designs, frequently finding that certain required parts were difficult to make or to assemble. The result was a process that involved a lot of going back and forth between departments and having problems that each department blamed on the other. With the Taurus, the different departments were involved at all stages, able to provide suggestions and share their knowledge so that the time from design to production was cut dramatically and the quality of the car was increased.

The value of teamwork is often appreciated in sports where it is generally recognized that having the best individuals does not make a good team if those individuals don't work well together. But even when people agree that cooperation is good, they usually only see it as a way to improve their chances in the external competition between companies or teams. Can eliminating such external competition also be beneficial? Maybe for companies, but what about customers? Doesn't competition keep prices lower and product or service quality higher? Not necessarily. In competing for customer share, price is frequently used as a weapon. Some companies use low prices to drive out smaller competitors who can't afford to match them. While the price war is going on, consumers may benefit from lower prices, but later they may have fewer choices and higher prices. And quality may decrease as corners are cut to maintain profits.

When profit margins are tight because of low prices, failures can't be tolerated and mediocrity sets in. Ever notice how a hit movie is sure to spawn several copycat movies or sequels? When someone thinks they've found a successful formula, they don't want to experiment with something that's untried. In gymnastic exhibitions or practices you will often see more spectacular skills than you see in competition. If no one is keeping score, the gymnast will try a technique they only hit 10% of the time. In competition, they will only use skills with a much higher success rate. Competition often leads to trying to avoid failure, and this reduces risk taking, innovation, creativity and variety. See Failing to Succeed in issue #2 of F.U.N. News for more on this idea.

So, if competition can be bad for companies and for customers, is the alternative to have government controlled monopolies? One need only look at the condition of most communist countries and heavily socialized countries to see this isn't the answer either. I am a strong proponent of the laissez faire system, and I believe the answer lies in a subtle change in our perspective on competition. Some people may miss the distinction, but the required change is to try to be the best you can be rather than trying to be better than everyone else. A company that makes that distinction recognizes that hurting their competitors does nothing to improve their own product or services. Gaining market share does not make them a better company. They may hope that improving their product or service will cause them to gain market share, but that is not their focus.

When companies can break out of their competitive view, they may find that gaining market share is not as important as increasing the market. Instead of viewing competition as a zero-sum game like dividing a pie, (for me to get more, someone else has to get less) they may realize that sometimes you can just bake more pies. Early computers all had their own proprietary systems. A computer from one company could not read the disks from another, much less run the programs. Few people were willing to tread into this confusion. But by sharing operating systems and hardware standards, the appeal to consumers was increased and many more computers were sold. IBM compatibles greatly outsell Apple computers because information about the platform has been shared among so many companies.

Today's kids will be better equipped for jobs if they are experienced in working cooperatively.

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