Encouraging healthy competition among employees.

By Christopher Freeburn

Competition is the bedrock of our economy. Companies compete with each other for customers, new ideas and opportunities. Within companies, competition exists as well, as employees compete with each other to make their way up the management ladder, or for bonuses or other perks. This competition can induce employees to be more productive, inventive and focused on improving the company. It can boost the bottom line and lead to innovation. Competition, we know, has its benefits.

Of course, it also has its downsides. Too much competition within a given workplace can lead to escalating tension among employees. This, in turn, can negatively affect the business's overall functioning. A business workforce riven by antagonistic competition may quickly discover that its employees are more concerned with their own advancement than the business's, which can result in decreased efficiency, eroding productivity, poor customer service, and, somewhat ironically, an overall loss of competitiveness in the marketplace.

So how can you foster an environment of constructive competition among your employees that benefits your business without exacerbating workplace tensions?

Avoid public grading. Many companies think they can foster competition by creating public lists of the most productive employees. A car dealership, for instance, might create a chart of its salespeople ranked by the number of cars sold in a month from most to least, and then post that list where the entire office can see it. The idea behind such a list is to spur the salespeople to sell more cars, but for those ranking at the bottom of the list, it tends to inspire fear of possible job loss, bitter envy of those surpassing them, and resentment toward the business in general. The sense of insecurity fostered by such a list can drive the lower ranked salespeople to cut corners and violate rules in a desperate effort to increase their sales. This can lead to significant trouble for the company later on.

Create a win-win environment. Nothing can divide a workforce as quickly as a winner-takes-all approach to bonuses and incentives. In their book The Enthusiastic Employee, David Sirota, Louis A. Mischkind, and Michael Irwin Meltzer note how such single-employee bonuses produce a negative effect. "We argue that individual reward schemes ... that will result in many employees having no sense of reward diminishes teamwork," the authors write.

If you choose to distribute rewards only to the top performer or single highest producer, you risk generating resentment and jealousy among other employees. Worse, average-performing employees, believing that they can never surpass the output of the "top" employee, may believe such rewards are permanently out of reach for them. In that case, not only with such incentives fail to motivate them to increase productivity, but they can actually depress their productivity and resourcefulness. This can be avoided by structuring incentives so that all employees who show an improvement in the specified goal or task receive some form of compensation. The incentive can be scaled so that those who achieve larger gains receive greater rewards, but by making sure that all of your employees have at least the chance of receiving the benefit, resentment will be mitigate and participation will be improved.

This type of competition-based reward strategy has two positive effects, Sirota, Mischkind and Meltzer write. "It boosts performance in an of itself; and it satisfies workers' camaraderie needs, which adds to their enhanced performance."

Promote teamwork. While individual performance should always be appreciated, a single worker cannot complete all the many projects and problems that a business must overcome. It is vital that a small business's workforce know how to cooperate to achieve common goals. Successful group efforts should always be rewarded. This can take the form of perks or profits shared among all members of a team working on a project, or to a small party of after-hours social event in celebration of the successful completion (or progress toward the successful completion of) a project or goal. Such events distribute positive feelings among the group, allowing all to share in the feeling of accomplishment.

Also consider allowing employees to generate suggestions for improving team performance. Likewise, rewarding those ultimately successful suggestions helps improve a feeling of cohesion among workers and a sense that they all have a stake in the business's long-term success.