Competition is usually considered a healthy business practice, but leaders who encourage it within an organization risk creating serious dysfunction that can torpedo success.

That’s the message from Stanford Graduate School of Business’ William P. Barnett, the Thomas M. Siebel Professor of Business Leadership, Strategy, and Organizations, who also serves as the faculty director of the Stanford Executive Program.

“Though we’d love it if competition always had positive consequences, it often has very negative consequences, both for the human condition and for the behavior of humans who live in fear of seeming to be a failure,” Barnett says. “The need to measure up, of constantly being evaluated, can create a tremendous amount of stress and behavior that turns out to be counterproductive.”

Barnett is perhaps best known for his work on “Red Queen competition,” which refers to the benefits that result from competition among organizations. In the recent Stanford GSB webinar “Leadership and Competition: Striking the Right Balance,” he discussed the drawbacks of competition and why it’s crucial for leaders to understand when to encourage it—and when to steer clear.

Competition is inevitable

Whether it’s a group of 5-year-olds playing soccer or members of a large multinational organization, humans are hardwired to think and act competitively. Competition exists in all human societies and is going on constantly, whether it’s encouraged or not, Barnett says.

“The understanding that social comparison is part of human existence is very important for you as a leader,” he says. “Competition happens at the level of small groups, whole departments, whole organizations, industries, and economies. Competition is happening everywhere; it’s all around us, and it shapes the decisions we make.”

Compare and amass

Competition has two primary underlying mechanisms leaders need to understand, Barnett says. The first is “measuring up,” the natural desire people have to compare themselves with others in order to understand where their performance or behavior fits in with the group. These comparisons are an incessant and unavoidable part of our personal, academic, business, and social lives.