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Commerce Matters with Benjamin Akande - Ladue News: Business & Wealth

Commerce Matters with Benjamin Akande

The Carrot Principle

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Posted: Thursday, October 22, 2009 12:00 am

Are you a 24-‘carrot’ manager? Can you help release potential and create success in your employees in good times and bad? According to Adrian Gostick and Chester Elton, authors of the New York Times bestseller The Carrot Principle, any of us can do so by enticing employees with the right ‘carrot.’ Mind you, the best incentive for improving employee morale, boosting productivity and increasing managerial success isn’t something tempting. It isn’t the paycheck we take home each week, the bonus tied to personal performance or the raise added for a job well done. The best ‘carrot’ in corporate America, based on a 200,000-person study by HealthStream Research, is something best served warm and often: recognition.

According to the authors, recognition ranks above pay and relationship with your manager. It also serves as an accelerant to what they call the Basic Four areas of leadership: goal setting, communication, trust and accountability. Recognition, writes Gostick, “makes an employee feel that everything—every extra minute, every ounce of ingenuity and effort—was worth it.”

Creating a carrot culture does not start and end with an ‘attaboy’ every once in a while. A healthy, productive recognition culture is an ever-evolving one that is created by effective managers who work on it daily, one person at a time. The authors maintain that day-to-day recognition can include notes, team lunches or spot awards. Above-and-beyond recognition is a way to spotlight achievements supported by a business’ values or goals. Career recognition highlights long term contributions.

Lack of any and all of the above can end up costing companies more than just the goodwill of their employees. Research in The Carrot Principle shows that 79 percent of top performers who change jobs list ‘lack of appreciation’ as a main reason for leaving. With turnover costs ranging from a few thousand dollars to a quarter of an employee’s salary, some companies, like KPMG, have found that a culture of recognizing and rewarding outstanding performance helps keep their best employees on the payroll. Gostick and Elton found that 60 percent of the employees at the audit, tax and advisory firm receive an award in a 12-month period. The result is a proactive stance against others poaching their best employees; instead, they make sure these exceptional workers know they are being noticed.

In the end, maybe the best reason for adopting ‘the carrot principle’ is its impact on the bottom line. According to the authors’ data, those who embrace the culture and recognize excellence in their own companies are also rewarded with a Return on Equity (ROE) three times higher than that of their competitors. They also found that businesses with the most employees agreeing to the following statement—my organization recognizes excellence—received a higher return on assets and operating margin. Recognition in tough times sends a message to employees that you trust in their ability to turn things around. Picking up The Carrot Principle as your next leadership read could be the best investment you make this fall.

To listen to Dr. Akande’s interview with the author of The Carrot Principle, visit webster.edu/sbt/carrot_principle.

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