Purposeful Recognition Leads to Innovation
Interview with Adrian Gostick, co-author of The Carrot Principle
By Graham Duncan
Drawing on case studies from leading companies including Disney, DHL, KPMG, and Pepsi Bottling Group, bestselling authors Adrian Gostick and Chester Elton show how the transformative power of purpose-based recognition produces astonishing innovations and results – whether measured by return on equity, return on assets, or operating margin.
Graham Duncan (GD):
The success of The Carrot Principle
comes at a time when we are experiencing the worst economic recession in a generation. The Carrot Principle
is number three on the New York Times Bestseller list. Your co-author Chester Elton has recently appeared on ABC Money Matters, Fox News and has been interviewed by BusinessWeek and the European HR Business Directors Summit. Does the success of the book suggest people are looking for more innovative approaches to the workplace?
Starting in 2008 we heard a lot of managers say, "I don't have the money to throw at my employees anymore. I can't give them huge raises. I can't give them huge bonuses. What else can I do to motivate them?" We re-issued the book with the second edition with new global research this year, and we are hearing managers saying, "I have to do something to get my people engaged. They are all worried about their jobs. They are worried about everything, and what we need to do is look at this from a positive perspective. How can I make them care again? We are all trying to do more with less. How can I get the most from my people in a positive way?"
Your co-author Chester Elton has recently appeared on ABC Money Matters, Fox News and has been interviewed by Business Week and the European HR Business Directors Summit. How important are these media appearances in helping to shape a culture in which engagement and recognition are increasingly valued in the workplace and at home?
Chester is starting to be seen as a global expert in the workplace. His opinions are valued by organizations. The media appearances have been important for the credibility of the message, because for years this message of "you've got to recognize your employees" has been very allegorical. It has been a soft message. For a CEO, they say, "Yeah, when I get past my strategy sessions, my budgeting, all of my capital expenditures, I'll start worrying about this."
What we found in the research is the companies that were good at recognizing their employees were actually three times more profitable than those that were bad at it. So, CEO's – and we are working with a lot of them right now – CEO's that really get this, have vastly more profitable organizations when they worry about their people. It's really changing that mindset from a "it's nice to have" in business to a "must have."
Your success would suggest that there is an increasing role for experts like Chester and yourself? What do you believe are the reasons for this?
Most of us are working adults, we have to go in every day to the workplace. Our experience is that there is a great need for somebody who can provide perspective on whether or not workers are in a positive environment, and if they are not in a positive environment, how we can help change the environment. External feedback is something managers value very highly.
Would you talk a bit about what initially led you to your interest in the topic of recognition in the workplace?
For a lot of years, I was a Vice President of a large financial institution. I worked in Public Affairs. I was hard-charging, like most managers, worrying about my customers and my bosses. Eventually my employees pointed it out and said, "You've got to recognize us more." That was such an alien concept. It was my employees that actually helped me begin recognizing them! It was a huge mind shift for me.
Then I began to see the power of this. Getting people together and thanking them, and recognizing them actually changed the work environment. They would work harder and smarter because I was recognizing the things that mattered the most to them.
About a decade ago, I teamed up with Chester Elton. He had been building recognition programs for some of the world's best companies, like Johnson & Johnson, Avis Budget Group, and others. Together we began writing books – combining his thoughts about practical knowledge of a manager and my experience as a leader. And we began interviewing people to confirm the validity of our argument that recognition and engaging employees is a way to change your organization for the positive.
What sustains your interest in this topic?
This may sound trite, but it really is when we go out and present, which we are doing on a weekly basis. One of us, or a group of trainers, will be working with managers in their organizations, and we will have people come up to us and say, "Thanks for this. It has really changed the way that I am managing my people. They seem more engaged. They seem to be happy." I receive emails on a constant basis from managers who say, "I was a little suspicious at first. I thought my employees would see it as manipulative or that I was trying to change their behavior, but I tried it, and I can't believe the change in my people when I do it right."
A lot of managers will say, "Well, I tried to recognize," and we'll ask, "What did you recognize?" They will reply, "I don't know, I was just thanking them." If you are not specific in your recognition, you're not going to be effective. Similarly, you won't be successful if your recognition is not frequent – if it just happens once in awhile. Similarly, there is a problem if your recognition is not timely. We try to teach the basics.
What really sustains us is this ongoing interaction and dialogue. I was teaching at a big hospital in Peoria, Illinois, just last week. One of the managers came up afterwards and said, "I've been a nurse all my life. About a month ago I was promoted to a position of leadership, so now I am a Nursing Supervisor. I have no idea what I'm doing. I read your book and I know you are right, because when I was a nurse I wanted to be recognized. You helped me formulate my thinking on this. I am going to be a great manager, I promise!" Those are the things that keep us going.
Your research indicates that today's workers are insecure, stressed, discontent, and increasingly disloyal. Are these symptoms of a recession or are there deeper problems that need to be addressed?
In some ways, what we have found is the recession is masking a lot of problems that are inherent in our workers. A lot of people in organizations are saying, "Hey, we are pretty good. Our turnover has been cut in half. All of our efforts are paying off!" Instead, the facts may be that the economy is masking inherent problem and, as soon as it starts improving, people are going to be out of here in droves! There has been a lot of research that suggests how employees are treated in bad times is going to come back to haunt the company in good times.
You need to be positive with your employees and continue to recognize and appreciate them, even if you are not able to hand out big bonuses and salary increases. If you are communicating and are showing you appreciate them, there is a very good chance they will treat you well when we come out of the recession. But if you take the mindset, and a lot of organizations have done this, that we are stopping all recognition, all communication that is not necessary, and we are going to hunker down and focus on our customers, the opposite actually happens.
Is this where your time with organizations is being spent – helping managers find alternative practices in which recognition is inherent in their day to day practice?
We are getting called into a lot of organizations that are realizing hunkering down does not work. In fact, we got called by a very large financial institution the other day. We were told their managers were still recognizing their employees, but to do that they needed to hide the required funds in their supply or travel budgets. They feel they have to continue recognizing or their people are going to start losing their motivation. The company leaders thought they were going to save money, but it was speculated they've ended up spending more money, and they've lost the efficiency of having one recognition system.
You say that 79 percent of employees who quit their jobs cite a lack of appreciation as a key reason for leaving, and that 69 percent of North Americans report that they weren't recognized in the least in the last year. What does this say about current management practices that are clearly missing the mark?
Let me give you one more statistic, and maybe it will explain things. In our latest research that we did with Towers Perrin late last year we found that 67 percent of managers, whether senior leaders or supervisors, believed they were above average at recognition. Let me ask you, Graham, what percent of employees do you think agreed?
I'd probably say less than half of that amount.
Yes, 23 percent of employees agreed! So, we have a huge disconnect. All of those managers think they are doing just fine. We talk to these type of managers all of the time. They have their arms folded in the back of our seminars. They say, "Yeah. blah blah blah. Recognition, yeah, I know. It's really important." They have forgotten what it's like to be an employee. They become so busy worrying about customers, deadlines, and the difficult work of a boss.
We're not oblivious to the pressures – Chester and I are bosses ourselves. We have a large team that we manage, but with that said, what we've found in our research is great managers took about an hour a week to recognize their people. They're the ones who have the most productive teams. They really engage their employees. That is all it takes – about two percent of your time if you work a 50-hour week. With that they get more productivity out of their people – they get more engagement.
It isn't hard, but your question is really good. Why don't we focus on recognition of our employees? We found that there are a lot of reasons. They are afraid of jealousies on their team. Managers feel they don't have time. They don't know what to give for various types and levels of achievement. We tried to outline some of this in the book.
Does it surprise you that work itself does not seem to intrinsically motivate employees?
Let me come back to the data. We found that the vast majority of people do have a lot of intrinsic motivation. In the first three years of joining a firm, extrinsic motivation is actually more important than intrinsic. There are a lot of obvious reasons for that. You are still learning the business. Somebody is telling you, "You are making the right choices, Graham;" "Really good work on that project;" and "This is how you fit into the big picture." They are communicating and setting clear goals for you. They are holding you accountable. You trust them. If you have a really good manager in the first three years, extrinsic motivation is really important because you still don't know where you stand in the organization.
Between years three and ten, that is where intrinsic motivation kicks in and takes over. It's not an exact science. Some people kick in much earlier, some a little later. This is where we found the big transition for a lot of people. After they had been with the organization for a couple of years they started feeling they knew where they fitted in, they were confident, and they were able to come in every day and just plug away – they didn't need as much guidance and extrinsic motivation from the boss.
What was interesting too, was that after year ten, they needed the boss again. That was completely counter-intuitive. Why would somebody who has been here for ten or more years need extrinsic motivation again? Through focus groups and interviews we found that those people needed to be respected. They had been with the organization so long that they started worrying. They were highly paid, but other people could be brought in for less money. They didn't feel listened to, and respected. They became nervous, and insecure in their roles.
Your observations are supported by ten years of research by the Jackson Group and Health Stream Research involving over 200,000 interviews with managers and their employees. What role did your organization play in this body of work?
We directed the analysis of the research. The data itself was collected by Health Stream, so we were very lucky to be able to dig into their database. We pushed them to include recognition questions, which they had never focused on before.
We found a correlation between recognition and profitability. Health Stream had never focused on recognition in their research. They were really excited when they called us and said, "We have found something really remarkable. We can't think of anther leadership characteristic that can make this kind of financial difference in an organization." "This is remarkable," they said. If we were seeing 10 or 20 percent variance between groups, then it may be an anomaly. It may be interesting. But something statistically significant is going on here with employee recognition and return on equity."
You say that the key element that shows up time and again in every great workplace is a manager's ability to recognize employees' talents and contributions in a purposeful manner. Why is purpose-based recognition so successful in promoting high performance?
Not all recognition is equal. The response of a lot of people when we tell them this idea is, "We tried recognition in our organization and it did not work. We tried having a program a couple of years ago, and it just didn't fly."
We have found that all recognition programs are not equal. Great recognition, when it really works, has varying levels depending on your contribution. It is also tied into the goals of the organization. It's not recognizing people because they are snappy dressers. Whenever I want something, John will just jump through hoops for me – that is not recognition. That's when favoritism appears.
In a great organization, recognition is tied into our specific goals as an organization. If we are all about customer service, I recognize when John goes above and beyond to save an account with an important client. If we are all about innovation, I should recognize great ideas that save us money, or save us time, improve a process, or generate a breakthrough idea. I recognize what matters most to the organization and that takes a lot of the complaining out of the equation. People realize that it's the behavior I'm recognizing, and not just the individual.
Over the past fifteen years you have worked in more than two dozen countries, and consulted with leaders of Fortune 500 companies. You indicate that you repeatedly witness the power of recognition to improve not only morale but business results. What kind of business results benefit from recognition?
We found that purpose-based recognition is most successful when it takes into consideration the individual employee's perspective. The key is to find out what matters most to employees. We all have personal goals in our position within an organization. We want to grow. We may want to be closer to our teammates. Whatever we want to develop, whatever goals we have, a great manager will align recognition to those goals.
Great recognition is aligned not only to the person but also to the goals and values of the organization. For somebody who wants to succeed in the organization, recognition might be participating in a presentation you are making to your CEO. People who have a social need may want to party or engage in activities that bring them together with people.
We found that the business benefits of recognition will not only sustain greater profitability; it also has a tremendous impact on turnover. As I said earlier, a lot of organizations are not really concerned about turnover right now, but it will become a problem whether it's several months or a year from now. We are still seeing turnover in the healthcare world; the service industry, and the IT industry. You want to keep your good people. Organizations that are effective in recognizing employees experience turnover that is a third of what it is experienced by those organizations that aren't effective. Even today recognition will have a significant impact on retention of your key people; it's not the lousy performers who are leaving in today's economic climate.
What can purpose-based recognition do for a business leader confronted by declining revenues, increasing competition and perhaps even a declining customer base?
A couple of caveats with regard to recognition are necessary. Our research found that it is not a cure-all for all ills.
You have to have a sound business strategy. We found most organizations have a pretty sound business strategy. In fact, often their competitor's business strategies look almost exactly alike. You can't be a buggy-whip company, and all of a sudden introduce recognition and expect your sales to soar. That's not what happens. We found that most organizations are relatively competitive with others in their industry, and they are looking for something more. Even with global competitors let's assume that you are well positioned. You have solid products. You haven't just introduced the new iPod, but you are pretty good at what you do, but competition is heating up. We found in these cases recognition will focus on the thing that you want to differentiate. Let's say it's customer service and you can't be the low price leader, so you want to differentiate on customer service.
Customer service is what you are going to recognize. You're going to find heroes in your organization, and you are going to publicize them. You're going to bring them up in front of everybody and you are going to say, for example, "That misplaced package could have been a big problem for us, but Don went out on a limb and found the package. He had to find a way to re-ice it because it was a perishable product and he stayed late to do it. He really saved our bacon with that important client, and that is why we are gathering today – to recognize his superior customer service."
In The Carrot Principle
you outline the importance of the Basic 4: goal setting, communication, trust and accountability. What is their relationship with purposeful recognition?
We were interested in the correlators of recognition. Health Stream Research came back with these four items. When I am a good recognizer, I am seen as a better goal setter, a better communicator, more trusted, and better able to hold people accountable.
The trust item was very interesting. We found that in a bad environment, in an environment of low trust, the number one complaint of employees was, "My boss either takes credit for my work or doesn't give me credit for my work."
Ongoing communication and dialogue are approaches that you strongly support. Does this really come down to establishing trusting relationships between managers and their staff?
We found that the strongest driver of trust is open communication. If you want to make your workplace one of the100 best places to work, then it is essential for you to develop open communication which involves at least a couple of important elements.
One is when you bring people in front of a group to recognize them, nobody tunes out. However, if you stand in front of your 15 employees and give them a speech about, for example, "Never miss a delivery. A missed delivery is really important." After about 30 seconds, they are all mentally gone elsewhere. They may all be looking at you and smiling, but they are thinking about something else. But if you recognize Steve for never missing a delivery and what he did to go above and beyond to help meet a deadline for a delivery, everybody will be paying attention. It's a story, and they won't tune out. That is a strong way of enhancing communication through recognition.
Another is to do some very simple things. In focus groups employees would tell us, "My boss comes in every day and goes up to his office on the 4th floor, closes his door and is in secret meetings all day. I don't see him until the end of the day when maybe he says goodbye." Use simple courtesies such as say, "Hello, how is your day going?" "How was your kid's soccer game?" "What are you working on?" "Is there anything I can help you with?" They should be sincere questions.
General Motors is in the early stages of restructuring. Already, commercials on television and the Internet are describing a transformation of the company. What advice would you have for the leadership of GM regarding the importance of building a different culture for its workers?
A lot of companies like GM are afraid of recognition because of their unions. Probably a third of the organizations we work with have unions. People in unions want to be recognized. They still want to be appreciated for their great work, and there are ways to work with unionized employees to build a positive and engaging work culture. First off, realize that despite contracts adversarial relationships shouldn't be the way of relating to your employees. We should be able to work together and make people feel like they are part of what we are creating in the organization. It comes back to those basics. For GM, it's essential that they build a culture where people are valued.
Day-to-day recognition should occur when someone goes slightly above and beyond, and they are making a good effort. We should be thanking them for these extra efforts and accomplishments on a regular basis. In our research we found that the best organizations praised their people about every seven days in a very specific manner.
When somebody is being innovative and comes up with a great idea, you've got to recognize that in an above and beyond manner. Unless you are giving them thousands of dollars the recognition will not be in monetary. You must find ways to recognize that will mean the most to the person being recognized.
Creative and innovative solutions are perhaps in greater need now than ever in order to transform the workplace. Are you optimistic that business leaders will be able to rise to this challenge?
One of the things that will happen is the tide is going out on the economy, and those with no pants on in the water are going to be exposed really quickly. In one way, this may be positive for us. People who are pretenders will go out of business and those who remain will be stronger. I think we are seeing a little of that falling out in different industries from this recession. Although hard, it's probably a good lesson for us that we've got to be really good at what we do if we are to survive. With that said, Chester and I feel very optimistic.
Business leaders are beginning to understand the importance of creativity and innovation. What they've known for years in their personal lives has to come into their professional lives. We spend more time than ever at work. Right now, on average the Canadian and U.S. worker spends 10 hours a week more at work than they did a couple of decades ago, and more time at work than medieval peasants did in servitude.
That is an interesting statistic and the reference to peasants in servitude really says something about the amount of time we spend away from the home.
Exactly, it comes down to priorities. If we believe it's this important to be at work, then we've got to start making these important connections with our employees. I think more managers understand this, and it gives us reason for optimism.
Would you agree we require leaders to further empower their staff? If so, what does that mean?
It's probably a lousy word, but it's a great concept. It's the kind of word that makes people cringe because it has become so cliché.
We were in Singapore recently and stayed at a great hotel where the concierge took care of our every need. We asked him why he took such good care with his job, and he said, "I'm the GM." At their hotel, they had convinced all of their employees that they are the General Manager. They are allowed to make decisions. Great organizations do this.
Look at the customer service model of a Nordstrom, or other great organizations that fully empower their people. They are allowed to make decisions. They are allowed to spend if they want to make a customer happy. That's what great organizations do. They give team members the power to please customers and serve them within their values, trusting them because they've hired adults who will do the right thing.
What role do workers need to play in increasing their motivations and their productivity?
If you can't get motivated in this economy, something's wrong! We are all worried about our jobs. We are all worried about our future earnings. This is the time to step it up.
When you look back at history, leaders emerged during difficult times – Churchill, Washington, and Mother Teresa, to name only a few. You pick any great leader that you can think of, whom you really admire, and they all were leaders during the worst times in history.
That's what happens with great employees. Some people will rise up in this time and others will fade away. If you want to be taken seriously, come back to the basic 4 of leadership. Meet with your manager and set clear goals. These are the things that I want to accomplish in the next six months. Then keep your manager informed. Communicate – "This is where I'm at" or "I've bumped into a road-block." Be open and honest with the good and the bad, which will build trust. Worry about building trust with your manager. Hold yourself accountable whether or not you meet your deadlines or not. As long as you're honest, you will be very well respected. Also, appreciate others. Cheer for your team mates. Cheer for your boss. Be the person who is recognizing others. As an employee those are the fundamentals that you need to bring to work if you are to rise above the others.
How important is it for business leaders to develop work environments in which risk, alternative views, and ownership of solutions by staff are incorporated into the culture of their organizations?
As we were writing one of our previous books one of the managers that we talked to said, "When my employees make a mistake, and they admit it, I give them a $100 bonus." This was really interesting and we asked him why he would do this. He said it was because he wanted to encourage risk-taking. People are going to make mistakes and he wanted to reward it. He realized that not everything is going to be successful. Nobody can be perfect. Nobody bats 1000 in the Major Leagues. We are going to strike out sometimes, and that's okay.
In organizations where risk-taking is frowned upon, you just can't develop innovation. You know that from your work.
What we recommend, and we've seen this where organizations have built recognition programs about ideas – they will recognize every single idea that comes in, with a very small award – even if it's a bad one. Whether it is a movie ticket, or whatever, they will recognize every single idea because they want to keep them coming. Staff is recognized a second time with a bigger award if the idea is accepted, but every idea gets recognition. It says we are in an innovative environment and we appreciate the free flow of ideas.
Incorporating meaningful recognition into their busy daily schedules may seem particularly difficult for managers. What strategies would you recommend to include recognition as part of their daily routines?
A good way is to structure it. In The Carrot Principle
, we talk about a recognition log. It's a very easy way to think about this.
Once a week you are going to recognize somebody, so just make a list of your employees and think about whether you have made a connection with each person. Have you thanked them for something specific this week? It's a very easy way to keep recognition in your mind even when you are busy.
Another is to keep a little note pad with you as you are walking around to jot down great things you have seen – poor Susan is working on that cross-functional key and I know it is an extra duty, but she still seems to be getting her work done. I need to thank her for that. Instead of just thinking it, by writing it down you will remember to do it.
Another very simple way is having it as an agenda item for your staff meeting. Begin every staff meeting with recognition.
In your blog
you recently wrote that your colleague Steve Gibbons was in Washington, DC where he visited the U.S. Marine Corps War Memorial at Arlington. You indicate that Steve came upon a remarkable recognition underway. Would you describe that recognition for our readers?
Steve was presenting at the Conference of the American Society of Training and Development. He had a free evening, so he decided to visit the Marine Corp Memorial, which includes a big statue of soldiers on Iwo Jima putting up the U.S. flag. When he arrived he happened to notice there was a ceremony underway. A one-star General was recognizing a new
Lieutenant-Colonel. The man had just been promoted and was about to receive the insignia of his promotion. Think of the sacrifices that this man must make for his career. He may have been deployed several times overseas. His son and his daughters were there, along with his wife. Instead of reading the order of his new commission, the General faced the new Colonel and saluted him and had the Colonel's son read the Commission Order. There wasn't a dry eye in the house.
Afterwards, instead of applying the new insignia of commission to his uniform – the entire family came and placed it upon the man. It was a brilliant way of recognizing him, and thanking him for his service by involving his family in this moment.
Would you talk about engagement and recognition in the home? Many of us do it fairly well, I think, in family environments but it isn't something we always carry over to the workplace.
That is an excellent point. We know this in our personal lives. If we want to have a successful marriage or partnership, we know that we tell this important person specifically, every day, that we love them and what they mean to us. Yet, when we come into work, we feel like a six-month review is good enough. "I give them my recognition every 2 weeks; their pay checks keep coming, don't they?" A lot of managers believe that line. Whether it is overt or subtle, many managers believe that their employees are professionals, and they should be able to intrinsically motivate themselves.
We find in all the research people can get a pay check anywhere. It's those intangibles that keep us working hard for a boss or manager. Recognition is always in the top three to five drivers of employees. This is the case no matter where the survey is conducted in the world, and no matter what types of questions are put in front of employees. It's important to pay our people well, and it's important to provide good benefits, but that is merely the ticket in the door. What keeps people in the organization, and keeps them motivated, is if they feel appreciated, if they feel in the loop, and if they feel their workplace is a great environment?
What other books would you recommend on the topics of staff recognition, creativity and innovation?
You probably know Seth Godin has written a lot of stuff on marketing and creativity. I really like his stuff. There are a lot of books that talk about recognition and how important it is – they don't talk about how you do it, so that is where we followed up.
Books like First, Break All The Rules
, by Buckingham and Coffman talks about the need for recognition. Another good book is Encouraging the Heart
, by Kouzes and Posner – it's a wonderful story, especially for a CEO. It describes the need to build a recognition culture and they really hit the nail on the head with that one.
What is on your summer vacation reading list?
I just started a couple of things. Just for fun, I'm reading a couple of novels of Genghis Khan. One is called Genghis Khan and the Modern World
– it's about how Genghis Khan changed the way modern society is structured and about his leadership abilities. It's quite an interesting read.
What other projects are you currently working on?
We are working on an analysis of teams. In the research we found that a manager is vitally important to the success of a team or an organization, but team members rely on each other. A boss or a customer may not be as important as my fellow teammates! So we are looking at bringing this research to bear on better understanding teams. W/hat makes a team function and be more effective than another in the same organization? It's an interesting analysis. We are working on the book for publication next year.
The Carrot Principle
illustrates that the relationship between recognition and improved business results is highly predictable – it's proven to work, time and time again. But, it's not the employee recognition some of us have been using for years. This is recognition done right, recognition combined with four other core traits of effective leadership.
Effective recognition, which all managers can easily learn and begin practicing for immediate results doesn't take time – it can be done in a matter of moments. And it requires very little investment to create a huge ROI.
Adrian Gostick's Bio:
Adrian Gostick is vice-president of Carrot Culture, a consulting and training division of the O.C. Tanner Company, the world's largest employee recognition firm.
He earned a master's degree in Strategic Communication and Leadership from Seton Hall University, where he is a guest lecturer on organizational culture.
Gostick is the author of several books on employee engagement and retention. The Carrot Principle
by Simon & Schuster has been a New York Times and Wall Street Journal bestseller. Larry King of CNN called 24-Carrot Manager
a "must read for modern-day managers." In 2006, The Invisible Employee
, also made the New York Times bestseller list.
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