6 Ways Healthy Office Competition Builds Teams and Improves Productivity Done well, competition within your company can dramatically improve success, productivity and even happiness.

By John Rampton

Opinions expressed by Entrepreneur contributors are their own.

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Competition within companies is a controversial topic. Some argue it increases output, while others say it creates a negative, cutthroat culture.

Both arguments are valid, but there's not a single right answer. Certain businesses create a cutthroat culture and promote it, while others emphasize teamwork through competition. A collaborative approach has the benefits of competition without the negative undertones.

If you're able to create fun, effective and team-oriented competitions, there's much to be gained. Here are six ways it improves productivity, makes your employees happier and increases your bottom line.

1. People enjoy competition.

For years Mihaly Csikszentmihalyi, psychologist and author of "Flow: The Psychology of Optimal Experience," has researched situations when people experience "flow," defined as being immersed in an activity until you are lost in the task at hand.

Csikszentmihalyi found that competition is one of the primary situations when people experience flow -- so long as the competition is sufficiently difficult. If a task is too easy, someone won't need much effort; if it's too challenging, people will give up but at the right difficulty level they are challenged to a point that fully immerses them in the task at hand. It takes all of their concentration to succeed and, subsequently, becomes an enjoyable and rewarding experience.

Creating competitions within the office can create this experience of flow. By immersing employees in working toward a goal, their time in the office will be much more enjoyable. They will want to come to work and, in turn, will reach higher levels of productivity as they attack their work with greater vigor.

Related: How to Use Flow to Make You More Productive

2. Competition sparks creativity.

When people are competing, they're more inclined to get creative to succeed. This creativity leads to heightened productivity. When there's less incentive to push hard for extreme productivity, on the contrary, creative solutions will appear with less frequency.

When employees want to succeed, they will experiment with approaches that lead to better outcomes. If a marketing employee comes up with a new lead source, for example, it can be spread to the rest of the marketing team, thus increasing productivity for all.

Related: How to Find Your Flow and Achieve Greatness

3. People will push each other.

With competition comes a higher standard of work. When a colleague is selling twice as much this quarter and a co-worker wants to match him, he'll work extra hard to do so.

We don't often realize what we're capable of until seeing the efforts of those around us. By creating office competition, people will look to their peers for inspiration. This creates a positive feedback loop that creates higher levels of output.

Related: 5 Mental Powers Every Entrepreneur Can Develop

4. Competition gives people more positive company associations.

When competition is executed collaboratively and effectively, it can give employees a more positive image of your company. At the end of a competition, they will be able to look back at their achievements and progress. Doing so is a rewarding feeling. Plus, they will have had fun along the way.

This will not only pull them further into your company, but it might also motivate them to recruit their friends. And working with friends boosts productivity, resulting in a win-win scenario.

Related: The Benefits of Having Friends in the Office (Infographic)

5. Competition can help with internal promotions and retention.

Internal competition can demonstrate how much an individual cares about your company. There's the reward at hand, as well as the pride of winning, to serve as motivation. That said, it often takes a dedicated employee to win an internal challenge.

These competitions can, therefore, offer ways to see how those in your company react under pressure. Some will thrive, which might indicate the ability to handle a promotion in the future. Others will work no harder. That will show where their motivations lie. These lessons can be helpful in managing, as well as empowering, employees moving forward.

Related: How to Build Healthy Competition at Work

6. Competition properly incentivizes hard work.

We've all heard a story of an employee who helped his company do $1 million in sales and received a $2,000 bonus in return. Situations like this discourage hard work and create unhappy employees.

Competition, on the other hand, will incentivize hard work. Those who are making the biggest impact earn the biggest payoff. This will motivate them to continue to work hard in the future. Plus, the net financial impact on your company will be positive. Correctly set up, the competition will generate more revenue than the rewards cost.

Your company doesn't need to be in constant competition to take advantage of the benefits that can arise. Even a yearly creative hackathon can add value.

While implementing these challenges, it's important to set up systems to maintain a positive company culture. Morale can be boosted -- or dampened -- by competition. Done well, competition within your company can dramatically improve success, productivity and even happiness.

John Rampton

Entrepreneur Leadership Network VIP

Entrepreneur and Connector

John Rampton is an entrepreneur, investor and startup enthusiast. He is the founder of the calendar productivity tool Calendar.

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