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Dog Eat Dog

“We do great business, building cutting-edge e-commerce sites. And we have great clients. But when they come to me with a new need, my first thought is: I haven’t a hope of delivering what they want.”

“We do great business, building cutting-edge e-commerce sites. And we have great clients. But when they come to me with a new need, my first thought is: I haven’t a hope of delivering what they want.”

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No, that isn’t a pathological pessimist or a disgruntled geek. It’s a sober reflection from Matthew Russo, a seasoned business development executive who’s discovered that the biggest obstacle in his way — his biggest challenge — is his company culture, which is designed to foment internal competition. Teams compete with each other for business, for talent, for resources. Turf wars fuel the company mission, the theory being that internal competition works just as effectively inside a company as it does across markets, delivering high efficiency and low cost.

Fifteen years ago, I worked for a company that was suddenly smitten by the idea of internal competition. With evangelical fervor, the entire corporation was upended and reeingineered, with the goal of turning us all into mini-entrepreneurs who would be as ruthless with each other as our employer was with its external competitors. It became a public fiasco — introducing more, not less, paper work and driving the most talented people screaming out the door. So I was intrigued to see the old idea rearing its head in a new economy, new technology business that could, perhaps, know better.

At Matthew’s company, teams are responsible for their own P&L, and their compensation is tied to it. They get paid more when they cut costs and rack up prices. The problem comes whenever they’re asked to do something new. That would involve research — but no one pays for research. It may be in the company’s long-term interest — but not the team’s bottom line. When the best person for a job is on another team, “borrowing” them exacts a premium — so it’s more cost effective to assign a home grown, even if inferior, talent. And if there’s a radically cheaper solution for the client, forget it: Long-term client satisfaction delivers nothing to individual teams. Matthew complains that more time is spent in internal negotiation than in creative work and that priorities (team first, then company, then client) are completely upside down. But the real victim isn’t just the client — it’s the culture.

Because in this kind of organization, you don’t have colleagues — you only have competitors. In a zero-sum game of business development, any victory represents someone else’s failure. Perspective is foreshortened, and it’s in no one’s interests to invest in new technologies or new people. Far from reflecting the efficiencies of the market, internal competition merely exacerbates its worst aspects: No wonder Matthew calls his colleagues the short term-ites. “I’d say about 95% of people here don’t look forward to work in the morning. They hate all the internal negotiation, they don’t feel nurtured and they loathe all the in-fighting.”

Companies that promote internal competition do so because they believe two things: that what everyone wants most is money, and that the best (or only) motivator is ego. Both, it turns out, are wrong. Acres of business research over the last 50 years have shown that, after basic human needs are covered, money is never the prime motivator at work. Which makes sense since there’s just as much research showing that money doesn’t make people happy. What does make people happy is activity linked to a purpose larger than themselves. That’s actually what companies and company cultures are for: to enlist our imagination and enthusiasm in something bigger and more exciting than just us. There’s nothing in the doctrine of internal competition that plays to this, and everything that makes us hate each other and, ultimately, ourselves.

Matthew knows what he’s missing, because he’s experienced it earlier in his career. He remembers (perhaps with nostalgia) the kind of leadership that is about being able to define and articulate that larger purpose. And he misses the culture that finds all kinds of ways, large and small, to keep it in mind. This doesn’t mean leaving self-interest at the door and going to work as saints. It does mean enlisting individual talents to work beyond me and for us.

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One of the best examples I’ve seen of this is at Carol Vallone’s company, WebCT. Every year, as the management team puts the next business plan together, she asks them to assess it through some one else’s eyes. The technology head has to imagine he runs sales and see how the new platform might effect the sales cycle. Finance has to view the plan through an HR lens and see how the plan will impact morale. They aren’t pretending to do each other’s jobs — but they are trying to understand the complex implications on everyone of any single decision. Carol takes this approach specifically to eliminate turf wars — in other words, to make sure that internal competition does not break out.

It strikes me that the theory of internal competition is like a lot of new technology: Just because you can sell it doesn’t mean it works. So, apart from applying to work for Carol, what can Matthew do to redeem his company’s culture? He can try setting a different example in his own team. This may work — or it may put him so at odds with the rest of the company that he’s branded a dissident. Since so many of his colleagues are unhappy, too, he could try forging alliances with them — but he risks being seen as undermining his ideological CEO. He can wait for enough people to leave that he has the data to make his case. Or he can leave himself. If he does that, you may be sure that what he looks for in his next position won’t be headcount, revenue, turnover, or option packages. It will be a simple question: Where’s your toughest competition, inside or out?

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