Competition-based management practices may do more harm than good at companies where there is a collaborative, team-based work environment, according to a new study.
Researchers at New York University and Columbia conducted a field experiment at a U.S. logistics company to determine how effective the growing trend of using data-driven management tools to spark friendly competition among employees may be.
While such tools increased performance by 3.75% in a competitive company culture, they backfired in a collaborative, team-based work environment, decreasing performance by 13.4% and costing the company up to $1 million, the study found.
“Our research suggests that data is not a panacea for getting more out of employees,” co-author Claudine Gartenberg of NYU said in a news release. “Companies with a collaborative work culture may see significant decreases in productivity and performance if they try to use data to foster employee competition.”
The field experiment tested the reactions of the logistics company’s drivers to the posting of a public performance ranking with each driver listed by name for all to see; a performance ranking listing just driver ID numbers so that each driver could identify only his/her own score; and no performance ranking.
Drivers in the company’s individualistic environments responded positively to public performance rankings listing drivers by name, improving their fuel efficiency by 3.75%. But those in collaborative environments reduced their fuel efficiency by 13.4%.
The response to performance rankings in which drivers were listed only by ID number and not identified by name was minimal.
“The key take-away from this research is that there is no one-size-fits-all solution,” Steven Blader of NYU said. “You can motivate employees in two ways: by promoting individual competition, or by encouraging employees to work together to help the organization succeed. It is important to tailor the motivation of employees to the company culture.”
The study noted that efforts to boost competition among employees can take many different forms, but there has been a recent surge in their use as technology and big data have brought new possibilities and opportunities.