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Improving performance effectiveness: making competition work for you.

In the Fall 1992 issue of Management Quarterly, Steve Collier concludes his discussion of the current paradigm shift with several comments on "A New Paradigm of Competition".(1) The concept of competition has long received incredible attention among management scholars and practitioners, but it has become especially popular in recent years. Books, magazine cover stories, even a federal commission has emerged to improve America's ability to compete into the 21st century. As Collier and others in the rural electric industry point out, this new spirit and practice of competition is also affecting electric cooperatives around the country. Interestingly, however, there is still no universal agreement as to what is competition (i.e., how to define it), and there is much debate as to when it is appropriate (i.e., good competition versus bad competition).

In this article, I will review ideas from over six years of my own study of cooperation versus competition. More importantly, I will discuss how rural electric cooperatives can benefit from a 'paradigm shift' in their philosophy towards cooperation and competition. Historically, the essence of cooperatives is cooperation--pooling resources to achieve success through economies of scale. However, there is a growing body of evidence that cooperation by itself tends to create complacency. Instead of viewing the collective as just an institution for mutual support, all members can benefit and avoid such complacency by also viewing the cooperative as an arena in which members "push" each other to do better--to compete with each other to motivate increased levels of effectiveness. By avoiding some of the potential detriments of competition, electric cooperatives can become more externally competitive by being more self- or internally-competitive.

Cooperation versus Competition

For close to 50 years now, the concepts of competition and cooperation have been juxtaposed as mutually exclusive and contradictory ideas. In the 1890's and through the first several decades of the 1990's, psychologists were discovering that individuals and groups performed tasks better when competing against others on the same task, than when trying to achieve a predetermined goal. By the same token, economists were claiming that price, productivity, and quality benefitted the consumer when several firms were competing to provide the good, rather than one firm alone existing to manufacture it. In fact, the Sherman Anti-Trust Act, and ensuing legislation, served to ensure that consumers could expect to enjoy the benefits of marketplace competition by the act's emphasis of prohibiting restraint of open competition.

Over the years, competition has become synonymous with western economic and organizational behavior. Calls for free trade, "speaking with their feet," the "invisible hand," and the quality revolution all symbolize our reliance on the marketplace to decide who provides the best good or service. Thus, being competitive came to mean providing a better good or service than the next guy. Even today, the call is to discover ways to improve our ability to compete, to "win" the marketplace. At the individual level, competitiveness became synonymous with a western tradition of "upwardly mobile behavior." Our heros were typically those individuals (business, athletic, scientific) who persevered and won against overwhelming odds or against formidable opponents.

However, starting 50 years ago, some began to question the value of competition in western society. In the pursuit of winning, competitors were judged as engaging in various behaviors that seemed more devoted to eliminating their opponents than in enhancing their own potential for success. Such noted psychologists as Muzafer Sherif and Kurt Lewin observed the severe levels of tension, hostility, and even sabotage that would occur under highly competitive situations. Economists and politicians found that the Sherman Act alone did not prevent companies from finding ways to assist in the failure of other firms as a way to increase their own success (including the more recent events of Ivan Boesky, the S&L problems, and, of course, any recent presidential election). In fact, the well-known social psychologist Morton Deutsch used nuclear proliferation as a key philosophy in promoting cooperative behavior over competition.

In reaction to these undesirable events, a spirit of cooperation and compromise became the dominant paradigm for corporate behavior, and more. Within the spirit of negotiation, interested parties were advised to find common ground, to split the difference in their demands. Even within the field of education, teachers were moving away from competitive grading and towards "cooperative learning groups." One noted researcher even proclaimed Little League as undesireable as such competitiveness would damage the esteem of the losing team's members.|2~ The shift to a cooperation paradigm emphasized a move towards mutual sharing and assistance in task performance. Cooperatives set up to provide goods and services to its members clearly illustrate this philosophy. Though the sharing of resources, technologies, and markets, all members of the cooperative can benefit. Additionally, this sense of open interaction and pooling of resources is intended to shift organizational focus from resource acquisition to production processes and customer service. At the operational level, cooperation sought to promote a better workplace climate. By eliminating competition, so the philosophy goes, one could rid of the organization of conflict, thus employees would work together more efficiently.

Unfortunately, research has found that cooperation alone tends to limit performance effectiveness through a process called "social loafing."|3~ Through this research, we have found that when people are not accountable for their contributions, or measures do not exist to determine individual contributions, there is a tendency to "slack off" and expect others to carry the extra burden. One of the most frequent complaints of committee and team work is that members avoid their fair share. Indeed, this phenomenon becomes more pronounced when the group has sole responsibility for the task. That is, social loafing is more prominent when no external competitors exist to create a demand for action or evaluation.

Furthermore, in promoting cooperation, many have encouraged an explicit avoidance of conflict.|4~ In avoiding conflict, individuals and organizations have chosen "to go along to get along." Such behavior has led to organizational complacency and stagnation. This problem can occur in two forms. Internally, a work group becomes stagnant as cooperation precludes discussion of differing ideas and alternatives. Such mental complacency has become popularly known as "groupthink" and is commonly illustrated by the Bay of Pigs and Challenger disasters. Externally, the absence of a competitor often creates a complacency of comfort that inhibits further development or challenge. While spectators marveled as Edwin Moses built his string of victories in the 400-meter hurdles, few noticed that his actual performance (time) was actually declining. Some claim the American Big Three auto-makers suffered such an effect from lack of competition as they pushed familiar designs upon a market desiring change.

The social loafing/complacency phenomenon is now so recognized, that former advocates of cooperation are now stating that competition can be beneficial under the proper conditions at appropriate times.|5~ In fact, it is now recognized that it is the constructive management of controversy that leads to innovation, quality, and motivation. Separating competition from conflict becomes an important aspect in outlining how to manage controversy. In this fashion, process versus outcome issues become the emphasis for distinguishing between good and bad competition. In fact, Deming refers to the need to "compete to become better" as one of the 14 points in his method of Total Quality Management. We will come back to this concept later.

The oil cartel provides an interesting analogy of the rise, and subsequent fall, of the cooperation philosophy. Initially, the Arab oil states competed against one another in the world market. Quickly they discovered that such competition limited profits, required technological re-investment, and potentially threatened the viability of the nation's economies. Through cooperation, OPEC was formed--going along to get along, sharing information and resources.

At first, this cooperation was quite profitable. However, complacency became disfunctional as the cartel over-estimated its marketplace control, and consequently ignored external events (developing technology, energy conservation, rising competitors). This external complacency seriously threatened the cartel's ability to operate effectively in the marketplace. In addition, a reverse form of social loafing internally threatened the cartel as some nations cheated on the self-imposed quotas while expecting others to bear the burden of production and sales restrictions. Only through confronting controversy was the cartel able to salvage its cooperative arrangement. By enduring outside competition, OPEC has become a more efficient, though not dominant, producer.

While not prognosticating the same fate for the rural electric cooperatives, one can draw some parallels. From recent articles and conferences, everyone seems to agree that the utility industry is becoming more competitive. The growing competitiveness outside the cooperatives is increasing the pressures on the cooperatives. These pressures are increasing competition between as well as interdependence among member cooperatives. Rather than just rely on a cooperative going it alone, or banding together to pool resources, we will discuss how a mutual, yet "friendly" competition among cooperatives can make the rural electric cooperative industry more competitive externally. The objective here is to tap into a method of self-competition that will improve the effectiveness of all rural electric cooperatives. This improvement will lead to a better capability to compete against the investor-owned utilities. Consequently, instead of ignoring or eliminating competition, the electric cooperatives can turn competition into a force that enhances its own self-awareness and quality. To do so, let's distinguish between external and internal competition.

External Versus Internal Competition

We can look at external competition as those "contests" in which an individual or organization is attempting to do better than another individual or organization. The popular press frequently addresses situations of external competition--the United States versus Japan, IBM versus Apple Computers, and of course, the annual participants in the Super Bowl. In each of these situations, the contestants are focusing on "winning" something--economic dominace, market share, the Lombardi Trophy. Collier discusses the three R's that electric utilities will be competing for in the future--retail customers, resources, and investor return. In this sense, your external competitors have been identified, as well as the prize for winning the contest.

This form of competition has been discussed and promoted at great length. The U.S. Council on Competitiveness was charged with discovering ways to increase competitiveness in the global economy. The renowned Harvard professor, Dr. Michael Porter, wrote the book Competitive Strategy|6~ to assist companies in capturing market share through better strategic planning and implementation. Finally, every Monday night, Al Michaels and company analyze the probability of victory for each of the evening's opponents. For the electric cooperatives, developing strategies to better serve consumers is the focus of the new paradigm of competition.

Notice that the focus here is on an outcome competition--the winning of something for a successful performance. In our new paradigm, let the contest for outcomes and rewards be the symbol of external competition. The economic concept of competition relies on the desire for outcomes as the incentive for being a more efficient contributor to the market. That an organization can only survive competition by efficiently providing quality goods and services demanded by consumers.

By the same token, we can identify situations within organizations in which members compete for desired outcomes. Departmental budgets, promotions, managerial skills, loading efficiencies, utilization rates, maintenance effectiveness all result in formal (lower costs, promotion up the corporate ladder) or social (status, influence) rewards. Unfortunately, organizational members tend to focus on the outcomes and how to get them, rather than on how to improve their behavior on the processes required to be evaluated well. It is this tendency to "win" rather than "do well" that has seemingly led to the destructive behaviors mentioned earlier, and emphasized by the opponents of competition. That is, situations in which competitors seek to win by causing the other participants to lose. While these contests are internal (occur within the organization), they are also external in that the focus is on outcomes. The bottom line here is that we want to shift attention from what is won to how to win.

The actual intent of these competitions is to induce people to work smarter, harder, and develop better ways to perform. People have a demonstrated tendency to compare themselves to others, to judge themselves by these comparisons, and to thus be motivated to act in a manner that creates favorable comparisons. Through these activities, one might observe and copy successful behaviors of others as a way to improve their own performance. In fact, this is the intention of internal contests--to create incentives to work better, provide a forum to see other's way of working better, and assimilating the 'best' strategy from among the winners.

Consider yourself a golfer, for example. As you play, there is a tendency to track your own score, and to evaluate your own capability. Now if you always played by yourself, there would be a social loafing tendency to become satisfied and not improve your score past a certain point. Complacency from cooperation would also occur if you always played with the same group "for fun." However, it is in our nature to compare, thus we strive to be better than those we play with, and soon cease playing with those we can easily defeat. We thus search for better golfers to play with. Or, the group as a whole decides it needs the challenge of playing against another foursome (the corporate tournament or scramble) or against each other (low score buys).

As we interact with our competitors, we observe those skills that might make them a better player than us. We then adapt or adopt those to our style--backswing, type of clubs, grip, training habits. Hopefully our game improves. The point is that only through the pressure of competing are we motivated to improve performance, to overcome complacency.

Once again, the similarity of this type of competition to aspects of the quality revolution should become obvious. A critical objective of the quality revolution is to focus on improving organizational processes. Identifying and improving critical behaviors will lead to improved quality. Improved quality leads to better goods and services. Higher quality goods and services leads to better marketplace performance--more consumers. In short, by winning the competition for quality, the form will only naturally win the contest for the consumer.

Many of us are familiar with this process through the practice of "benchmarking." However, whereas benchmarking identifies desired behaviors and performance levels to be met, I am presenting internal competition as a method to continuously set and exceed standards. In addition, competitors must continuously evaluate their own and their competitor's behaviors to find ways to improve their processes. Once again, a crucial concern is tapping this comparison desire without generating hostility and tension.

Good Versus Bad Competition

In reviewing our discussion so far, I am again struck by a common dichotomy whenever I address this topic. It is interesting that we should glorify the spirit of the Olympiads as both an athletic contest, and as a measure of patriotic fever and political superiority (external competition). And, it is common for us to admire the dedication and investment of those who choose to compete at such higher levels (internal competition). Yet in the same breath many are quick to disparage the same activities under different conditions. Some cite that competition leads to unethical behavior due to excessive compulsions to win. Our academic institutions use GPA and test scores as a critical admissions criteria, yet criticize students' emphasis on grades. Thus it seems that at the same time we are demanding that our organizations be more competitive, we are trying to stifle development of the personal traits and behaviors that lead to competitive success.

At this point, let me qualify the use of sports as an organizational metaphor for this discussion. I have seen competition in many forms in many settings. However, sports embodies the philosophy of competition, both in positive and negative form. On the one hand, it has been claimed that men have a managerial advantage over women due to their socialization through sports.|7~ That by learning how to win and lose graciously, they are better prepared for the day-to-day focus on the bottom-line in corporations. On the other hand, it has been stated that sports symbolizes what is wrong with western society, that even the competitiveness of Little League is too damaging to self-esteem to allow its continuance as a youth activity. That is, we get so obsessed with the concept of winning, that fairness and interpersonal harmony are easily discarded.

My own research has shown that the act of competition itself is not the threat to social relations and personal behavior. In fact, it is the structure of the contest that leads to the negative effects we frequently observe. Thus, by eliminating the potential structural problems, we can harness the potential benefits in a way that improves organizational performance. The following is a sample of the ways in which we transform competition from a learning and motivational process into a fight over limited outcomes:

* By attaching important outcomes to winning, people focus on gaining the reward at all costs, not on performing well.

* By creating "winner take-all" payoffs, people view each other as obstacles to desired outcomes.

* By focusing on individual payoffs, not organizational contributions, people focus on self-interest.

* By not establishing clear, fair rules, people are encouraged to take shortcuts, to sabotage others.

* By rewarding outcomes without reviewing how they were obtained, we reinforce winning at all cost.

Competition exists, both within and between organizations. Learning to avoid the hazards while tapping its benefits seems critical to electric cooperatives in the years ahead. However, sometimes it is difficult to assess what situations are competitive and what situations call for cooperation. For example, players on a basketball team must cooperate with each other to execute plays, to win games. Thus passing the ball becomes a cooperative behavior that benefits the team. By the same token, players compete on the basis of ability to earn their position on the roster. Thus skill development and personal statistics become a competitive aspect of team membership. While some cooperation is necessary for coordination of effort, one would not ask a player to not perform at their best because it was someone else's turn to be the star. As Harvard Business professor D. Quinn Mills has stated, many organizational situations are cooperative and competitive at the same time.|8~

Cooperative Competition

What I am leading to is that effective competition does require cooperation among participants, just as cooperation is effective only to the extent that it contributes to competitiveness. In looking at the problems of competition cited earlier, we see that they may be due to a lack of cooperation--in clarifying rules and expectations, in monitoring and disciplining behavior, in agreeing to the contest. Additionally, I have stated how problems due to cooperation are often due to a lack of competitive incentive to prevent social loafing.

In looking at sports we see that many of the problems cited above are avoided by the joint existence of cooperation and competition. It is the absence of these dysfunctions that contributes to the esteem we hold athletics, while at the same time criticizing the existence of competition elsewhere. For example:

* In sports, there are team and individual measures of performance, yet team performance is of obvious priority,

* In sports, there are many objective criteria by which to evaluate performance.

* Win-lose outcomes do not preclude individual performance measurement or improvement.

* In sports, rules are clearly spelled out so there is no question regarding acceptable and unacceptable behavior.

* In sports, there are penalties for rule violation.

* In sports, there are designated referees to monitor behavior.

In looking at the rural electric industry, we can draw several parallels. The shift to a new competitive paradigm calls for adopting a receptive approach to external competition. This article calls for extending that new paradigm to include internal competition. By tapping the motivational and learning benefits of competition, managers within the cooperatives and even the cooperatives themselves can compete against each other in a manner that improves the quality of service (e.g., maintenance records, utilization rates, repair response time, safety records, cost control). In the same manner as the golfer, the cooperatives can improve from this pushing and learning from each other. Naturally, this also requires careful attention to avoiding the potential frustrations that can occur from poorly conceived competition. In closing, the following steps are offered to developing effective competitions for cooperatives in the critical years ahead:

* Identify what task management, or the cooperatives as a whole, will compete on. There are several dimensions in any cooperative which can be used. The critical aspect is clarifying what the focus, or foci, will be. More than one performance measure allows for multiple winners, and prevents focusing on some task requirements to the exclusion of others.

* Agree on the rules. To avoid dysfunctional behaviors (hostility, sabotage), it is important to clearly spell out the rules. Management must also agree to the rules. Such "contracts" help avoid later resentment or complaints. These rules should include measures of performance, time frames, judges, penalties.

* Provide opportunity to "buy in or out." My studies indicate that self-created contests work best because they are voluntary. Typically superiors may make the mistake of forcing subordinates into contests which they do not wish to join. For example, at one Coop, employees had a Christmas decoration contest. Those that wanted to participate displayed extensive creativity and effort. Those that chose not to participate left their cubicles blank with no retribution, or teasing from their colleagues.

* If there are to be prizes for winning, make sure they are of low value. For example, marketing personnel in the cooperative may compete for a steak dinner (the losers got hot dogs). As such the focus is on how to sell, not on what is to be won.

* Focus on processes, not outcomes. The point of the contest is to improve performance, not to increase outcomes. To this end, make sure your Coop picks realistic opponents. People's competitive drive is quickly extinguished when they are obviously out-classed. Just as we would not play tennis against Boris Becker, do not over-match your employees or your Coop.

* There are no losers. Again the focus is on excellence. And again, there are many ways to win. Point out improvement, contributions to the cooperative, and potential for the future. Once again, the objective is to continually move forward.

References

1 Collier, Steve. Restructuring in the Electric Utility Industry: Old and New Paradigms. Management Quarterly, Fall 1992.

2 Sherif, Carolyn. The Social Context of Competition. In Martens (ed.) Joy and Sadness in Children's Sports, 1978.

3 Harkins, Stephen and Kate Szymanski. Social Loafing and Social Facilitation: Old Wines in New Bottles. Review of Personality and Social Psychology, 1987.

4 Tjosvold, Dean. Managing Conflict, 1989.

5 Johnson, Roger and David Johnson. Learning Together and Alone: Cooperative, Competitive, and Individual Learning, 1991.

6 Porter, Michael. Competitive Strategy: Techniques for Analyzing Industries and Competitors, 1980.

7 Colwill, Nina. The New Partnership: Men and Women in Corporations, 1982.

8 Mills, D. Quinn. Rebirth of the Corporation, 1991.

Dr. Steven M. Sommer is an Assistant Professor of Management in the College of Business Administration at the University of Nebraska. He holds a Ph.D. in management from the University of California, Irvine. He taught at UCI and at Cal State-Fullerton before he came to Lincoln.

Professor Sommer's research focuses on the process of co-worker competition and how such activities impact performance and interpersonal relations. This research has been linked to cooperation, goal setting, team-building, and sports psychology. He has written several articles on this topic, some of which have been presented at regional and national conferences.

Before entering academe, Steve worked in the furniture industry, university administration, property management, and program administration. Since entering academics, he has consulted to organizations in health care, aerospace, financial services, manufacturing, and government.
COPYRIGHT 1992 National Rural Electric Cooperative Association
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Sommer, Steven M.
Publication:Management Quarterly
Date:Dec 22, 1992
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