Thinking orange

For the past decade we have been studying employee engagement. We wanted to know why some people work so hard and smart and others … well, don’t. We’ve surveyed more than half a million employees, and in late 2008 conducted a study of Singapore working adults. And after all this research? What we have found about motivation, effective management, and the role of the “carrot” is actually quite remarkable.

What is a Carrot? In short, it is employee recognition – appreciating the great work of your team members. And for a successful leader, it’s an acceleration tool. Our Oxford English Dictionary calls a carrot: “something enticing offered as a means of persuasion.” In business, a carrot is something used to inspire and motivate an employee. It’s something to be desired. In fact, it tops the list of things employees say they want most from their employers. Simply put, when employees know that their strengths and potential will be praised and recognised, they are significantly more apt to produce value.

Yet some will ask, “Isn’t money the most effective carrot? Aren’t the allure of bonuses and increases in salary what really motivate our employees?”

Cash is no king

To begin with, the fact is that money is not as powerful a reward as many people think. While pay and bonuses must be competitive to attract and retain talented employees, smaller amounts of cash – anything short of US$1000 – will never make the best rewards because they are so easily forgotten.

In fact, one third of the people you give a cash award to will use that money to pay bills. Another one in five won’t have any clue in a few months where they spent the money or even how much they received. Just ask yourself, did you save the bank deposit slip from the last time someone gave you a $100 cash bonus? Is it tucked away in a scrapbook of memories? Of course not! But what about something useful and tangible that was given to you as a reward? Not a t-shirt, sleeve of golf balls, or canvas tote bag – but something useable and valuable. Chances are, even years later, you still own it and can picture the award in your mind.

However, the more prevalent problem with cash is that the supply is limited and strictly controlled, and your people know it. Now, for many of the managers reading this book that might not be the case. Many of you in middle and senior leadership roles are indeed motivated by the allure of a large bonus or increase in salary. Hefty sums of cash may in fact be motivating to you. But realise that for the majority of the people in your charge, that’s just not a possibility. And here’s why: No matter what they do, your employees know you only have so much cash to share with them. Pay, for example, is determined by the employee’s experience, job type, higher corporate policy, location, and other external factors outside your and your employees’ control. If an employee is doing a fantastic job, you might be able to get them a 5% raise at the end of the year. Not much motivation there. As for large bonuses tied to personal performance, they are typically reserved for mid- to upper-level leaders. Lower-level employees and professional staff typically receive a standard bonus amount, with very little variation from person to person. Not a lot of motivation to excel there either. Benefits, too, are locked in. As a manager, you can hardly offer an excellent employee a better dental plan.

So it’s time to learn what you do control: The Carrot supply!

Working carrots

“When people join us, they obviously have agreed on the pay,” Elizabeth Martin-Chua, former vice president of Philips Electronics in Singapore, said. “What they are hoping for is a good environment where they can use their capabilities and talent to good advantage and then be recognised for it.”

Martin-Chua’s comments are backed up by a study by HRM Singapore, which in December 2005 interviewed 3000 people. When asked, “What do you really want from your job,” employees ranked “pay” number three on the list. Number one was “Career and Learning Development Opportunities.” And number two? “Recognition”. According to HRM: “The economic success of Singapore means that employees need more than pay to be motivated.”

And that leads us to the key finding of our global studies: the central characteristic of truly effective management is a manager’s ability to recognise employees’ talents and contributions in a purposeful manner. Our study results show that when recognition is considered effective, managers have lower employee turnover, achieve enhanced business results, and are seen as stronger in other areas of leadership such as goal-setting, communication, trust and accountability.

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

Adrian Gostick and Chester Elton are the authors of the global bestseller The Carrot Principle. Their new book The Orange Revolution: How One Great Team Can Transform an Entire Organization will be published by Simon & Schuster in September 2010.