The Carrot Principle: How the Best Managers Use Recognition to Engage Their People, Retain Talent, and Accelerate Performance [Updated & Revised] [Hardcover]

I read an interesting book on the weekend called, The Carrot Principle -" How the Best Mangers Use Recognition to Engage Their People, Retain Talent, and Accelerate Performance by Adrian Gostick and Chester Elton. Clearly this is a title that would attract anyone who is trying to lead a company.

The gist of the message is covered in the title which is appropriate rewards motivate people. One thing that I like about the book is it talks about goal setting, communication trust and accountability, and the use of carrots as an accelerator to make all of this work faster and easier.

The book has a multitude of statistics and studies which of course adds to the credibility.

One thing that I have found over the years is formalized carrot programs become stilted and can even become entitlement instead of being earned. Similar to performance metrics â" sometimes they focus on the wrong thing and are given to people for performing only one part of the job when inherently the job is more complex than just one dimension.

This said, the book definitely reminded me that I need to work harder at recognizing performance.

I have a simple compensation philosophy (and I know the carrot is not all about compensation) and that is "if the company does well, the people should do well", or in other words, the company should pay what they can afford to pay which allows staff to participate in success.

More than 10 years ago, an organization that I headed, Leading Division Presidents 100, looked at the question of how to improve employee motivation and effectiveness. From that research, it was clear that improving employee recognition could be an important element among many. Since that time, I've looked in vain for a book that described how to implement such a recognition program. I'm pleased to say that The Carrot Principle fills that void. Congratulations to the authors.

The authors begin by making the case for why recognition works in making organizations more successful:

1. Where employees feel more recognized, return on equity is higher (2.4 percent in the lowest quartile compared to 8.7 percent in the highest quartile. (This finding did raise a question in my mind -- why are the companies in this research study all so unprofitable in ROE?)

2. Where employees rate managers highly for recognizing employee contributions, customer satisfaction, employee satisfaction, and retention are usually higher.

3. People with high work motivation almost all (94.4 percent) say that their managers are effective at recognition.

4. 79 percent of those who quit jobs cite lack of appreciation as one reason for leaving.

How much are companies spending that provide good employee recognition? Basically, it's about $1,000 a year per employee. Many of the employers cited in the book report feeling that they enjoy economic payoffs that are more than 20 times that cost.

The authors offer a Recognition Effectiveness Model on page 178 that captures the essence of how they see the cause and effect working:

1. Where employee recognition is higher, goal setting, communications, trust, and accountability are higher.

2. These benefits are accelerated by recognizing what matters most which helps with alignment, reinforcing the desired culture, company values, and business objectives.

3. These benefits can be further accelerated by doing recognition in the right way, increasing impact by being inclusive, meaningful, and performance-based.

4. Business results improve because the program is relevant to manager tasks and improvements in employee engagement that lead to better employee retention, productivity, customer satisfaction, and profitability.

The methodology for putting this model in place begins with measuring, then assessing, designing, training, executing, and then reiterating those steps.

The statistical findings are described in detail in appendices B, C, and D which I recommend you read.

But a lot of people have reported that recognition is important. You probably already believe that or you wouldn't be considering this book.

I found the most beneficial parts of the book concentrated in how to create a carrot culture (of recognition) and details of how to manage by carrots (recognition). Before leaving that subject, let me say that I found the carrot metaphor troubling. Recognizing people isn't the same as dangling a carrot in front of an employee's face. Recognizing people is more about respect, caring, gratitude, and paying attention.

Basically, most managers don't provide much recognition. Why not? Although this book suggests all kinds of false beliefs are the reason, my research shows that the primary reason is that managers who don't get recognition don't give recognition. So the good example has to begin at the top. That's counter to most company cultures where the CEO is viewed as some kind of superman or superwoman and the rest of the organization's people are expendable.

With training and guidance, that circumstance can be changed. I found the materials in chapters 9 and 10 to be most helpful in explaining what kind of recognition is appropriate for what kinds of accomplishments and 125 recognition ideas. I was also pleased to see that the authors understand that recognition is individual; each person has a different idea of what they want. You need to provide what's wanted . . . or it doesn't work.

It's not easy to provide meaningful recognition. When you do, the results can be magical (for everyone). When you do it badly, you are often worse off than where you started (having made people feel like they are unimportant rather than simply ignored by a busy manager).

My main fear about this book is that some readers will see this as just another way to provide low-cost benefits for which employees will put forth very valuable efforts. In that context, recognition can become another kind of manipulation, and that always backfires.

Let me leave you with two words of warning:

1. Recognition doesn't work alone. You also need to provide opportunities for people to learn, grow, accomplish, feel fulfilled, and achieve many other important satisfactions. In that sense, this book is too narrow to be totally useful.

2. Recognition takes time and consistency. Don't start unless you intend to continue or you'll eventually make matters worse.

Note: The review that follows is of the updated edition (published on April 7, 2009) that includes results from a major global study in which more than 200, 000 managers participated.

Various surveys conducted among millions of workers indicate that "feeling appreciated" is of great importance to them. In fact, it is ranked #1, #2, or #3, together with "doing work that has value" and "working for an employer I respect." Nonetheless, believe it or not, a recent study conducted by the O. C. Tanner Company indicates that 74% of leaders worldwide still don't practice recognition with their employees. In this book, Adrian Gostick and Chester Elton explain why there is reluctance "to embrace the power of recognition." At this point, I need to make a distinction between formal (institutional) recognition and informal (situational) recognition. Probably no other organization makes more effective use of formal recognition than does Mary Kay. With all due respect to pink Cadillacs, the fact remains that this company has identified hundreds of other ways to say "Well-done!" and celebrate outstanding performance.

With regard to informal recognition, I wish to share a personal experience that occurred when I arrived at a client meeting (it is a Fortune 50 company) and was being escorted from the reception area to the CEO's office by his administrative assistance. We walked past one office and I stopped, having noticed through the open door a framed "something" on the wall. It was the office of a senior vice president and he was not there. "Everyone notices that," she said. "Here, take a look." We entered the office and I examined what was under the glass: more than a dozen multi-colored Post-its, each personally inscribed with brief, congratulatory comments addressed to "Warren" for a winning proposal, an excellent presentation, etc. "He's so proud of those little notes that he went out and got them all framed." I cannot say that "Warren" would rather have the Post-its than a new Cadillac but that's beside the point anyway. Everyone appreciates being recognized. They welcome appreciative recognition. The 74% of managers who deny or ignore those facts are making a very, very serious mistake.

With regard to this book's title, Gostick and Elton explain that in business, "a carrot is something used to inspire and motivate an employee. It's something to be desired. In fact, it tops the list of things employees say they most want from their employers [or at least is among the top three]. Simply put, when employees know what their strengths and potential will be praised and recognized, they are significantly more likely to produce value." In this context, recognition's function is to serve as an incentive and the reward (as the Post-its example indicates) need not be monetary. "In fact, "Gostick and Elton note, "one-third of the people you give a cash award to will use that money to pay bills."

They organize their material within three Parts: The Accelerator (i.e. leadership needed to establish and then sustain a "carrot culture"), Carrot Culture (i.e. its design, "building blocks," and operations), and Managing by Carrots (i.e. cetermining the nature, extent, and funding of awards). They provide managers with a cohesive, comprehensive, and cost-effective program by which to "engage their people, retain talent, and accelerate performance." According to recent Gallup research, only 29% of the U.S. workforce is positively engaged (i.e. loyal, enthusiastic, and productive) whereas 55% is passively disengaged. That is, they are going through the motions, doing only what they must, "mailing it in," coasting, etc. What about the other 16%? They are "actively disengaged," doing whatever they can to undermine their employer's efforts to succeed.

So, a combination of formal (institutional) and informal (situational) recognition "accelerates business results. It amplifies the effect of every action and quickens every process. It also heightens your ability to see employee achievements, sharpens your communication skills, creates cause for celebration, boosts, trust between you and your employees, and improves accountability." Those who read this book and then decide to introduce or revise a recognition program will need the convincing, indeed compelling support for doing so that Gostick and Elton provide in their brilliant book. I presume to add that establishing and then sustaining a carrot culture requires recognition initiatives that create a climate of appreciation. Don't wait until you have recruited an army of those who share your vision, don't wait until a full-blown program is in place. Show your appreciation now, at every appropriate opportunity, if only with a brief expression of praise as I do now with Adrian Gostick and Chester Elton: Well-done!