July 2, 2007

Corporate America’s Latest Silly Fad: Internal vs. External Competition

The avowed capitalist will tell you that competition inspires better performance. The avowed capitalist is right. Competition is so effective, it’s hard to imagine a situation in which it would not be a good idea.

Well, as I’ve often told you, I love capitalism, but I find that capitalists have a tendency to act weird. One such application of this weirdness is the tendency to believe that, if something is good, it is good always and everywhere.

Alfredo sauce is good, but not on ice cream. Exercise is good, but not when you’re asleep. Many a capitalist who believes in the virtue of competition neglects the next step of considering where and when competition gets the job done. He just figures: Everywhere! I’m a capitalist! Competition is always good!

Thus we find ourselves faced with an emerging fad in the business world – that of internal vs. external competition. It works like this:

The department head calls together a team from the department and announces a new project. It is the Strategic Bloviation Initiative. It will require high-level bloviation execution by a team of skilled, experienced professionals.

“You are the team we have chosen to compete for this project,” explains the department head.

Huh? Compete? With whom? For what?

“We have sent RFPs to four qualified bloviation firms,” the department head continues. “You – the members of the team we have assembled – will compete with these firms for the bloviation project.”

Why?

“Because competition is great!”

This is the latest brilliant brainstorm of corporate America. Get your employees to perform better by making them compete with outside sources for the right to actually do the work that needs to be done.

As with most silly ideas, this one wouldn’t exist if it didn’t have just enough kernels of common sense to fool its adherents into thinking it is completely logical. The competition, or so goes the thinking, will serve as an incentive for the internal team to improve its efficiency, control its costs and improve its outcome.

And they might do all those things. But if they really think about it, they might not. Here’s why:

Your employees are on salary. Granted, you might entice them with bonuses or something of that nature for winning the project, or for performing well if they win it. But for the most part, you’re paying them whether they do the project or not.

So you’re asking them to work really hard for the privilege of working even harder. They have to prepare a proposal, a presentation and a budget to persuade you to add more work to their plates.

And they will want to do this . . . why? Perhaps you think it’s to prove to you that they’re needed in the company. But by creating the competition, you’ve just told them that you’re not so sure about that yourself, and this is the kind of thing that tends to get resumes on the street rather quickly.

In the meantime, you’re asking four outside companies to compete with your internal staff for this project. Now, I ask you, have you ever won a contract with a company, only to get in there and find that a person or group of people within the company doesn’t want you there?

In this case, if you win the project, it is already guaranteed that one of the parties you defeated for the project is sitting there waiting for you with howls and scowls pointed in your direction. They might actually be relieved that you got the project, since it’s less work for them, but that doesn’t mean they want you to succeed at it.

Indeed, the best-case scenario for the employee group is to lose the bidding, then have the contractor screw up so the company wishes it had picked the employees.

So, nice work, Bunky. Either your employees are overworked, and mad at you for making them compete for the privilege, or your contractors are being undermined at every turn by the employees who – oh yes – are mad at you for making them compete in the first place.

Competition is always good! Except when it’s obviously not. You have to think, boss. Even alfredo sauce is yucky sometimes.