Book Summary Preview : The Carrot Principle

The Big Idea

The Carrot Principle unveils the groundbreaking results of one of the most in-depth management studies ever undertaken. This study, involving 200,000 people over a ten-year monitoring period, shows that the central characteristic of the most successful managers is that they provide their employees with frequent and effective recognition. Dramatically greater business results were obtained when managers offered constructive praise and meaningful rewards in ways that motivated employees to excel.

Why You Need This Book

In this book, authors Gostick and Elton show how the power of purpose-based recognition produces astonishing increases in operating results, however those are measured. Recognition in this sense, however, is recognition done right –combined with four other core traits of effective leadership.

Further, they show how great managers lead with carrots – incentives – and not sticks, and in doing so achieve higher productivity, engagement, retention and customer satisfaction.

The Accelerator: How the Best Managers Deliver Extraordinary Results

A missing ingredient
In business, there are leaders who are visionaries – those who see the untapped potential of their workforces and believe that it’s possible to reach higher. They have been trying for years to experiment with their leadership style, have consulted mentors, read business books, and attended seminars, but have always fallen just short of getting their employees to reach their maximum potential. 

What they need is an accelerator – the so-called missing ingredient that will bridge the gap between where their teams are now and where they can be. And in the workplace, there is no accelerator with more impact than purpose-based recognition. This, then, is the Carrot Principle – the use of purpose-based recognition to spur company success.

The data from the study overwhelmingly supports this conclusion:

1. In response to the question “My organization recognizes excellence,” those companies that scored in the lowest 4th overall had an average return on equity (ROE) of 2.4 percent, whereas those scoring in the top 4th had an average ROE of 8.7 percent.

2. Those companies rated most highly in response to, “My manager does a good job of recognizing employee contributions,” also ranked very highly regarding customer satisfaction, employee satisfaction and retention.

3. Of the people who report the highest morale at work, 94.4 percent agree that their managers are effective at recognition. In contrast, 56 percent of those who say they have low morale give their manager a failing grade regarding recognition.

A note regarding cash: cash is not the most effective “carrot” or “accelerator.” Small amounts of cash are easily forgotten, and large amounts of it are typically given out as bonuses for mid- to upper-level leaders.

The study results show that when recognition is considered effective, managers:

1. Have lower turnover rates. People always cite “feeling appreciated’ and “informed” as important when asked what matters to them in a job.
2. Achieve enhanced business results. Investing in recognizing excellence is strongly associated with the best financial performance.
3. Are seen as far stronger in the Basic Four areas of leadership, namely goal setting, communication, trust and accountability.

In other words, recognition accelerates a leader’s effectiveness.

The Basic Four of leadership
Recognition gives coworkers a vision of the possible and the desire to garner the rewards. But it is far from the only answer; the basics have to be in place first. If you haven’t mastered the basics of leadership, you most likely don’t have the foundational basis for employees to accept and react well to recognition.

Here are the Basic Four areas of leadership, along with a brief description of each:

Setting clear goals.Companies that wrap their day-to-day lives completely around their mission and values can infuse their employees’ work with a clear sense of purpose. Employees need clarity from their leaders: clarity of goals, clarity of progress and clarity of success. Great managers seek to interconnect company goals with individual employees’ goals, and that is truly what leadership is about. (Goal setting has a higher correlation to employee satisfaction than the other Basic Four skills.)

Communicating openly.Being left out of the loop is the single biggest cause of dissatisfaction in many a company. A senior leader’s job is to communicate corporate goals to employees and motivate them to achieve them – by maintaining open communications at all levels. If the leader involves himself in it, the communication can develop according to the leader’s priorities and goals.

Building trust.In an organization where leaders are trusted, there is a greater level of employee investment. When an employee believes his manager has his best interest at heart, it motivates him to give his best to both his work and the company per se.

Holding people accountable.Accountability means that anyone who makes a promise to anyone else fulfills that promise, because it’s the right thing to do. One key to holding people accountable and doing it right is equilibrium. As leaders we have to learn to identify not only employee failures, but also employee triumphs and successes.

 

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