Why Internal Competition is a Bad Idea

A Vice President for a large financial services company recently asked me about the merits of creating internal competition.

He was thinking about creating a kind of scoreboard that would show branch managers how their particular location stacked up against other branches. The scoreboard would contain metrics from a variety of categories such as customer satisfaction.

The idea was to motivate managers to find innovative ways to improve the performance of their branch.

I told him I thought the scoreboard would cause an unintentional problem while preventing another one from being resolved.

By the end of the conversation, I think (hope) I convinced him. Here's my explanation.

The Danger of a Scoreboard

Competition can spur innovation, but it also rewards selfishness.

A branch manager who wants her branch to be at the top of the scoreboard may come up with innovative new ideas, but she might be reluctant to share those innovations with another manager she views as a competitor.

She'll keep those ideas to herself instead to increase her advantage.

Then there are the other branches. What if a branch manager sees his branch is far behind on the scoreboard? He might feel embarrassment that his branch is performing so poorly, but that embarrassment might not cause him to try harder as intended. It may make him feel uncomfortable, disengaged, and defensive. Or he might just stop trying.

Then there's the impact on customers. It's great for customers of the high-performing branch. But what happens when one of those customers visits a low-performing branch?

The inconsistency will reflect poorly on the entire brand.

 

Raise the Bar Higher Instead

Here are the Yelp ratings for the 10 Starbucks locations that are closest to my house:

Every single one is 3.5 or 4 stars. 

Would Starbucks like to do better than 3.5 stars? Absolutely, but the graph also reveals why Starbucks is so popular.

Very few people would say Starbucks is their favorite coffee shop or the best coffee shop. But Starbucks is incredibly consistent and dependable. No matter where you are in town, you can expect a similar experience.

The opportunity for Starbucks in my neighborhood is also clear. The chain would have an even stronger presence if they could get all of their stores to a 4 star rating.

My advice to the financial services branch manager was the same advice that seems obvious for Starbucks when you look at this graph:

Try to raise the bar for all branches.

The competition isn't against other locations. It's against external competitors. And the way to do better is to raise the performance of all locations while maintaining consistency.

Here are a few ways to do that:

  • Discover what top-rated locations are doing differently and share those best practices.
  • Uncover what low-rated locations are doing differently and help them improve.
  • Encourage all locations to raise their level of service together.