In 2007, Adrian Gostick and Chester Elton published “The Carrot Principle”. Its premise and supporting data show how managers using purposed-based recognition (specific, task-based & timely acknowledgement of a job well done) gain a competitive advantage. They also:
- Have lower turnover rates
- Achieve enhanced business results
- Are seen as much stronger in what they call the Basic Four areas of leadership:
- Goal Setting
In other words, recognition accelerates a leader’s effectiveness. The impact of recognition on a company is a bit like watching the center pole lift up the middle of a large tent: everything else rises too except one thing – turnover. With effective recognition, that can drop like a rock.
Retention Accelerated – Corporate turnover absorbs resources at an astonishing rate and is by far the most significant uncalculated expense in business today. The reason for the high cost has to do with the type of employees who are leaving. If it were only the poor performers leaving, turnover would be a good thing. But it’s not. Organizations that fail to effectively recognize their employees are losing the very achievers they wish they could keep to meet their goals.
Compounding the problem is the shortage of skilled, talented employees. We are all in a race for talent, and the best place to find talent is under our noses. And yet some 75 percent of the U.S. workforce is not fully engaged on the job. So what IS working? Recognizing employees in a purposeful, meaningful way has a profound impact on the financial results for the companies that embrace this discipline.
Let’s take a deeper look:
Business Results Accelerated – Research consultants from recognized leaders such as KPMG and Mercer had always seen recognition as a key driver of employee engagement and satisfaction. However, they had never cut the data to test for a connection between effective recognition and business outcomes.
When they did, the results were startling: from every angle, from every financial way of looking at it, investing actual time in recognizing excellence is strongly associated with the best financial performance. This study involved 26,000 employees at all levels in 31 organizations of varying sizes and profitability. The sample size and variance of company profitability and engagement created data that are statistically unquestionable.
The organizational results were then compared with the following profitability measures: return on equity, return on assets, and operating margin.
A simple truth emerged: we work harder at places where we feel recognized and valued for our unique contributions. And valued and engaged employees bring great value and profit to their organizations. Gostick and Elton show us in this outstanding book in a very dramatic way, that recognition is one of the key characteristics of effective managers and great organizations.
But before we can understand how it accelerates performance, we must grasp the other characteristics of great management: The Basic Four of Leadership which are listed above: Goal Setting, Communication, Trust and Accountability. We will tackle each of these critical components individually in upcoming posts.
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