How Leaders Can (and Should) Build Healthy Competition at Work

By Tyler N. A. Fezzey

Competition is inescapable in business. Salespeople compete for customers; employees compete for promotions, teams compete for resources, and organizations compete for market share. Even without a formal contest, employees tend to notice who advances at work, who receives praise, and who appears to be winning. Competition is therefore a double-edged sword: Properly structured, it can focus effort, encourage ambitious goals, and heighten performance. Poorly structured, however, the same competition can trigger stress, conflict, knowledge hiding, and employee misconduct. This article explains how leaders can capture more of the upside of encouraging competition at work without exposing employees, teams, and the organization to its most damaging consequences.

Consider two organizations with equally demanding targets. In the first, representatives are accountable for their individual results, but everyone who clears a difficult benchmark can earn recognition, and part of their reward system depends on the department or group reaching an interdependent team goal. In the second, only the top employee can earn a substantial bonus; rankings are posted every week, and employees compete internally for the best accounts. In the first system, helping a colleague can also help you win. In the second, the same act may improve a rival’s odds at your expense, making it rational to protect leads, withhold information, and resent coworkers’ success. Both organizations are competitive, but only one has defined winning in a way that enables interdependent people to succeed together while reducing the incentives for counterproductive behavior. Thus, only one has designed competition that can be both productive and sustainable.

My research on competition points to one central lesson. Employees bring different levels of competitive drive to work, and leaders shape the cues, rewards, and constraints that determine how that drive is expressed. 

COMPETITION IS A DOUBLE-EDGED SWORD 

Competitiveness is a relatively stable personality trait defined as the extent to which someone enjoys interpersonal competition and seeks to outperform others. The competitive drive can be channeled toward effort, mastery, and legitimate achievement in one environment, yet toward status protection, information hoarding, or rule-bending in another.

In my meta-analysis, the double-edged pattern of competitiveness was clear. More competitive people tended, on average, to invest more effort, report stronger engagement and commitment, and perform better than their less competitive counterparts. Yet competitiveness was also positively associated with anger, anxiety, stress, aggression, risk-taking, a bottom-line mentality, Dark Triad traits (i.e., narcissism, Machiavellianism, and psychopathy), and workplace deviance. The same drive to get ahead can also manifest as malfeasance. This is what leaders must actively temper through organizational design.

The upside of competition is often visible first, making it enticing to encourage. Competitive employees tend to push through demanding assignments and appear unusually resilient because they continue producing under pressures that overwhelm others. My work on competitive teams and hypercompetitive cultures suggests that a leaderboard or winner-take-all bonus may lift this month’s performance metric while trust, collaboration, employee well-being, and willingness to share ideas erode more quietly. Those slower-moving costs can later surface as absenteeism, regrettable turnover, weaker innovation, and performance that is difficult to sustain. Leaders cannot choose employees’ personalities, but they can shape the situations in which those personalities operate.

ORGANIZATIONS CAN TURN COMPETITION UP OR DOWN

Leaders shape the intensity and consequences of workplace competition through five practical levers.

Target: Who are employees trying to beat? Competition aimed outward (e.g., against an external rival or a market standard) can focus effort without necessarily turning teammates into adversaries. Competition aimed inward, especially within interdependent teams, makes coworkers themselves the obstacle to success. The more a system defines victory as beating the person at the next desk, the more likely employees are to guard information, withhold help, and interpret colleagues’ gains as personal losses.

Scarcity: How many people can succeed? Competition becomes more zero-sum (and potentially more corrosive) when only one or a few employees can earn a desired reward. Scarcity tells employees that a coworker’s gain may be their loss, heightening envy and making behaviors such as withholding help, guarding information, or undermining rivals more tempting. Some resources truly are scarce (e.g., raises, promotions), but ensuring that rewards such as positive recognition are abundant can curb competitive malfeasance.

Visibility: How often are employees reminded where they stand? Leaderboards and posted rankings may motivate some employees, but they can also heighten status anxiety, especially for employees who repeatedly see themselves falling behind. Over time, this can erode morale and lead some employees to disengage and put in even less effort if they feel they’ll never measure up.

Stakes: How much is attached to winning? Large bonuses, promotions, prestigious assignments, or reputational rewards raise the consequences of relative performance. As the stakes rise, so does the incentive to protect one’s position, manage impressions, or potentially take shortcuts.

Interdependence: Do employees need one another to succeed? Competition becomes especially difficult when coworkers must share information and coordinate effort while the reward system encourages them to behave like rivals. Shared or team-level goals and rewards can reduce this contradiction.

SIX WAYS TO BUILD HEALTHY COMPETITION

Leaders do not have to choose between high performance and healthy working relationships. The objective is to preserve the motivational value of challenge and achievement while reducing unnecessary interpersonal threat.

1. Aim competition outward when possible. When employees need one another to succeed, avoid making the person beside them their primary rival. Competing against a demanding external benchmark, customer standard, or another organization can create urgency without making teammates’ success personally costly.
2. Make excellence attainable for more than one person. When multiple employees create value, leaders should reward all achievements rather than manufacturing a single winner. Uncapped incentives preserve stretch goals while reducing unnecessary scarcity. For example, saying “Everyone who reaches this target earns the bonus” creates a very different social dynamic than “Only the top performer wins,” even if it is likely that only one person may hit the target.
3. Reward the method, not just the result. Two employees can exceed the same target in very different ways. One can develop employees, share information, and collaborate while the other hoards resources, mistreats coworkers, or cuts corners to reach the target. If both hear only “Great numbers,” employees learn that results matter more than how they are achieved. Rewarding information sharing, ethical conduct, and collaboration (along with strong performance) will encourage ethical competition.
4. Match incentives to how the work gets done. When performance depends on cooperation, part of the incentive system should reflect collective results. Team rewards, shared objectives, and recognition for helping others can (and should) coexist with individual accountability. Reward structures should make collaboration instrumental.
5. Use competition selectively and frame it constructively. When leaders use competition, the language and recognition matter. Celebrate progress, improvement, customer outcomes, innovation, and collective achievement alongside winning so employees learn that success means more than beating the person next to them.
6. Monitor the whole system over time. Treat a competitive incentive like any other business intervention. Did the target metric improve after implementation? Did collaboration, retention, customer relationships, safety, or well-being deteriorate?

THE GOAL IS NOT LESS COMPETITION; IT IS BETTER-DESIGNED COMPETITION

Organizations need ambitious people who care about performance and pursue difficult goals. The mistake is assuming that because competitiveness can support high performance, adding more competition will always produce higher performance.

That leaves leaders with three jobs: 1) harness the desire to succeed, 2) ensure that success does not depend on damaging their people, and 3) decide what winning will require. When the path to success rewards excellence, ethical conduct, and contribution to others, competition can strengthen the organization rather than consume it. 

STRATEGIC QUESTIONS FOR BUSINESS LEADERS

1. Where are employees explicitly or implicitly competing for rewards, recognition, assignments, status, or advancement?
2. Who do employees see as their competition? Is it their own prior performance, teammates, other departments, or external rivals? Is that target helping or hurting collaboration?
3. Which of those competitions are genuinely necessary, and which create unnecessary scarcity?
4. Are people being ranked against coworkers they also depend on to succeed?
5. Are employees rewarded for how they achieve results as well as for the final metrics?
6. Could an employee improve their odds of winning by withholding information, undermining a coworker, or taking questionable shortcuts?
7. What may improve immediately by instilling competition, and which slower-moving costs (e.g., trust, well-being, customer relationships, or innovation) might surface later?

ABOUT THE AUTHOR

Tyler N. A. Fezzey, Ph.D., M.B.A., is a Visiting Assistant Professor of Management at the University of West Florida’s Lewis Bear Jr. College of Business. Her research examines trait competitiveness, personality, leadership, and organizational culture. Dr. Fezzey earned her Ph.D. in Management from the University of Alabama.