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.

The REAL Way to Motivate Customer Service Employees

Employee motivation has been a hot topic in customer service for as long as anyone can remember.

In the old days, the threat of punishment was used to motivate customer service employees. The message was clear — do a good job or be fired. 

That approach didn’t work because employees would do just enough to avoid getting fired.

In more recent history, rewards and incentives became an import facet of management philosophy. The idea was you could get employees to do something they’d normally find distasteful by incentivizing them with cash and prizes. 

That approach didn’t work because employees would do just enough to win a prize.

The current management thinking revolves around gamification. Think of it as rewards on steroids. A perfect attendance prize gets a lot more exciting if you can win points, badges, and work your way up the team leader board.

Unfortunately, there’s plenty of evidence to suggest that gamification doesn’t play well with customer service employees.

So, what does work?


Intrinsic Motivation - The REAL Motivator

In his book, Drive, author Daniel Pink examines reams of evidence on employee motivation and comes to a clear conclusion:

The carrot and stick approach doesn’t motivate knowledge workers to do a better job. In fact, it’s counterproductive and often results in poorer performance.

Pink discovered that knowledge workers, such as customer service employees, are intrinsically motivated. He found three specific factors that motivate employees to do a better job. Unfortunately, these factors are sorely lacking in many customer service environments:

  1. Purpose
  2. Mastery
  3. Autonomy



People want to belong to something and know their work has meaning.

In customer service, this means creating a customer service vision. This is a clear definition of outstanding customer service that is shared by all employees. It serves as a compass to point everyone in the same direction.

Most customer service teams don’t have a clear purpose. My own research revealed that only 62 percent of companies have clearly defined outstanding service. Of those companies, only a few can honestly say their employees can give a consistent answer to two critical questions:

  1. What is our customer service vision?
  2. How do I personally contribute to the customer service vision?

If you want to know why customer service at In-N-Out Burger is so much better than McDonald’s, look no further than purpose. Both started with the same core values, but only In-N-Out has made them a real part of their culture.



People love developing their skills. It feels good to be good at something.

Many customer service teams are anti-mastery. Companies keep salaries low by hiring low skilled employees. They skimp on training. Leaders find themselves with very little time to give coaching and feedback unless something goes wrong.

Amazing things can happen when you give employees the opportunity to grow and be their best. Not in a superficial, here’s your “Knowledge Badge” and ten experience points sort of way. True mastery is that process where people become increasingly better at their jobs.

Earlier this year, I wrote about Jesse, a new employee at a bagel shop. She was awkward and lacked confidence because she hadn’t been properly trained.

Jesse underwent a complete transformation over the course of a few weeks. She stuck with it and figured out how to do her job. She asked questions and learned from her experiences. Now, Jesse engaged customers with confidence and personality because she had mastered her basic responsibilities.



Ask customer service employees what they dislike most about their jobs and many will tell you it’s a lack of autonomy.

  • They don’t like scripts, because it feels like they aren’t trusted to say the right thing.
  • They don’t like rules, because it seems like they aren’t trusted to do the right thing.
  • They don’t like data, because it appears to be a tool for micromanagement.

Engaged employees are given the autonomy to do what’s right.

They have a clear purpose they believe in and are trusted to work towards that purpose. They are given opportunities to learn and grow so they can master their ability to contribute to the purpose.

Creating a clear purpose, helping employees develop mastery, and giving employees autonomy can be time-consuming. Many managers fall back on the carrot and stick approach because it seems easier. In the long run, any time savings is lost in lower productivity, lower morale, and higher turnover.

If you’d like to see more, check out this amazing ten minute video that summarizes Pink’s research on employee motivation:

Why gamification doesn't play with customer service employees

Gamification can focus employees on awards, not service.

Gamification can focus employees on awards, not service.


Gamification is big. It’s finding its way into everything from innovation, to customer experience, to software testing. A 2011 research report from Gartner predicted that 70 percent of organizations will have tried their hand at gamification by 2014. 

What exactly is gamification? Here a definition from Wikipedia: 

Gamification is the use of game thinking and game mechanics to engage users in solving problems.

The possibilities seem endless. Who doesn't love a good game? In the future, we’re likely to see gamification reach even farther into our lives, as suggested by a popular short film about a guy whose life is completely gamified. 

One arena where gamification doesn’t seem promising is customer service. A 2012 Wired article does a nice job of laying out the major pitfalls: 

  • Intrinsic rewards are replaced with extrinsic ones. Think of it as moving employees from “I want to help customers” to “I want to win the game.”
  • It ignores fundamental problems. Will awarding points and badges for attendance really make a bad workplace any less soul crushing?
  • Gamification is often really pointsification, meaning the object becomes the accumulation of points and awards rather than immersive fun.

It’s sometimes quite easy to spot employees operating in gamified environments. I recently placed a lunch order at a fast casual restaurant and was hit with, “Would you like to add a cookie to your meal so I can win a contest?” It was an annoying pitch. Helping this guy win the Cookie Monster badge had nothing to do with me.

Gamifying customer service tasks also fits the definition of bad goals. These are goals that can inadvertently lead to poor performance. Here are three characteristics to watch out for: 

  • Diverts attention away from the ultimate goal of outstanding service
  • Reward selfishness over teamwork
  • Focus on external rewards rather than intrinsic motivation

Customer service software company Freshdesk has this example from the website advertising their Freshdesk Arcade platform:

Source:  Freshdesk

Source: Freshdesk

Let’s look at how the characteristics of bad goals might apply to this point system. 

  • Diverts attention. Notice that ending the call quickly can earn twice as many points as solving the problem on the first call. 

  • Rewards selfishness. Earning individual points takes precedence over helping co-workers succeed.

  • Extrinsic motivation. Getting the most points and whatever that entails can quickly replace the intrinsic motivation to provide great service.

In this scenario, your lowest scoring agents could conceivably provide the best customer service.

But wait, gamification principles do have real value!

Gartner researchers have identified four ways that gamification engages employees. Take away the scoreboards, badges, and goofy contests and you’re left with four aspects of really good management.

Let’s look at each element in Gartner's model:

1. Accelerated feedback cycles. Games work because you know exactly where you stand. Why shouldn't the same principle apply in customer service? Giving employees regular and consistent feedback on their performance will help them continuously improve.

2. Clear goals and rules of play. Customer service goals can be incredible motivators, so long as they follow the characteristics of good goals:

  • Focus attention on outstanding service
  • Promote teamwork
  • Rely on intrinsic motivation

The rules of play, in the form of policies and procedures, should always be absolutely clear. They should also be sufficiently flexible to allow employees to adapt to each situation. As I wrote in a recent post, unclear goals, roles, and policies can challenge our sense of belonging and commitment.

3. A compelling narrative. The best customer service companies do this by focusing on customers as individuals. They get to know customers by name and share customer stories. They set out each and every day to create legendary customer service stories. If you want a terrific example, check out the Communicate Better Blog run by Phone.com’s award-winning customer service team.

4. Tasks that are challenging but achievable. This last one fits customer service perfectly. It’s not always easy making every customer happy, but the very best employees are always trying their very best to make it happen.

Perhaps gamifying customer service is like most trends. There’s real value in the concept, which is why it’s trending. But there’s also the danger of taking it too far.

Where do you come out?