Dangle Your Company Carrot

Typically, when we hear the word “carrot,” we think of a crunchy, orange vegetable, or something our mother made us eat in order to get dessert. Switch gears to the business world, and your CEO may refer to it as a reward offered for desired behavior – an inducement. Simply put, a carrot is something used to inspire and motivate an employee.

I was recently lucky enough to attend a luncheon where The Carrot Principle was the featured topic. Originally published in 2007 and a New York Times bestseller, The Carrot Principle demonstrates that the most successful managers provide their employees with frequent and effective recognition.

Recognition done well encompasses much more than inspirational wall hangings, logoed business trinkets or the other accessories that managers and organizations often turn to. Effective recognition is more human than that. It’s frequent. It’s specific. It’s timely.

  • Frequent – managers who earn the respect and dedication of their people do so with many simple yet powerful actions: writing a heartfelt note of thanks, highlighting a team member’s performance in a staff meeting, etc. Frequent praise may be commonplace in our personal lives, but it is often overlooked in business. Think of it this way, the workplace equivalent of “I love you” is “Thanks.”
  • Specific – general praise has NO impact. Non-specific praise can actually be discouraging for an employee, since it implies that the manager has no idea of the unique value he or she brings to the team. A cartoon from James Stevenson in the New Yorker years ago illustrates this concept well – “Keep up the good work, whatever it is, whoever you are.” Not very motivating, is it?
  • Timely – recognition is best when it’s fresh. The authors of the book analogize this by saying, “There’s a reason that all sports teams award their trophies right after the championship game, when the sweat is still streaming down the athletes’ faces: it means more right after the event.” Timeliness shows that someone is paying attention, and that as team members, we are important and necessary.

In addition to these warm and fuzzy facts, investing in recognizing excellence is strongly associated with the best financial performance. Companies that effectively recognize excellence enjoy a return on equity (ROE) and a return on assets (ROA) more than three times higher than the return experienced by firms that do not. And of all the financial measurements, companies in the highest quartile of recognizing excellence report an operating margin of 6.6 percent, while those in the lowest quartile report 1 percent.

Remember this: motivating people is paramount to a company’s ability to survive. Sometimes the most difficult years are the best times to start effective recognition programs or revamp the dying ones. If you read any book this year, I highly recommend The Carrot Principle.

Schneider Downs provides accounting, tax, wealth management and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA, and Columbus, OH.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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