Observations From a Tipless Restaurant, Part 3: How Tipping Promotes Bad Service

This is part 3 of a series detailing what I learned from operating our farm-to-table flagship restaurant, the Linkery, as a “no-tipping” restaurant that instead charged a fixed percentage for service, from 2006 to 2013. We also operated a sister restaurant, El Take It Easy, that followed the traditional tipping model, allowing for a fairly direct comparison. Part 1 is here and Part 2 is here.

Probably the most common reaction to our service-charge-no-tips policy, from people outside the service industry, was along the lines of, if there’s no tipping, then how will the servers be motivated to do a good job?

When you step back and think about this for a second, it’s actually kind of hilarious. The person asking this question would have a full-time job as a software developer, or lawyer, or journalist, or doctor, always working to a pay rate that was negotiated ahead of time. We would never suggest that a code jockey or surgeon would be motivated to do better work by the thought that their clients, if pleased with the service, might toss in a few extra dollars.

And yet, we restaurant-goers (and I include myself in this, in the days before I worked in restaurants) are not hesitant to suggest that, unlike all other working Americans, restaurant servers are a class of simpletons who require a drip of money every few minutes to keep them on task. By perpetuating the idea that servers, and servers alone, won’t perform without the threat of pay withheld, we dehumanize our neighbors and peers who work taking care of us. I think this helps us not feel bad when we sometimes treat them badly. It’s the Stanford Prison Experiment meets Yelp.

Meanwhile, restaurant workers know what’s up. People who worked in the restaurant industry wouldn’t ask us this question — what will motivate servers to do a good job? Because, inside the restaurant, we know that while the customers think their tips allow them to control the server, in fact the control is illusory. The story of the server being motivated by the customer’s power to tip, is instead a fiction created to make the customer feel important.

This was one of the first things I learned as a restauranteur.

When we opened the Linkery, I was 20 years removed from my most recent restaurant job, at a gourmet sandwich shop where I had worked as a prep cook and dishwasher. I had never in my life waited tables. I, like many restaurant patrons, assumed that my tip decision was the primary thing on the servers’ minds while they worked.

One night a few months into the Linkery’s existence, I asked our best server about a table of high-maintenance guests who had just left the restaurant. Specifically, I was curious, given how demanding they were, if this group had tipped high or tipped low.

“I don’t know,” she said. “I never look at the tips until the end of the night. It basically always evens out, if one table tips low, someone else tips high. You always make about the same percentage of sales.”

Another of our better servers joined the conversation to say that she did the same thing. Because, she said, “there’s too much to think about already. You have to not think about the money so you can take care of your tables.”

I wasn’t expecting this attitude from high-performing servers; I had accepted on faith that it was only the tips that motivated them to do good work. Now curious, I started an informal study of our team, watching how they handled the tipping part of the job over the weeks and months. Without exception, the best servers never talked about their tips — as far as I could tell, they never even thought about their tips — until after their shift was over. The best performers were fully engaged with simultaneously filling the needs of 25 people in a busy, crowded restaurant. It’s a complex job and they brought their full selves to it.

Meanwhile, I found that if a server did talk about tips during service, that server would invariably be among our weaker team members. Which made sense once I understood it — how can you be thinking about your guests’ needs when you’re thinking about your money? By raising the thought tips during service, these poor performers were, I think, subconsciously trying to bring their coworkers down to their level. The better servers would have none of it — they would reliably decline to take the bait of discussing money instead of hospitality.

When in time we started contemplating the elimination of tips from the Linkery, I looked for actual research on the subject, and found Michael Lynn’s then-recently-published “Tip Levels and Service”. This paper shows that in spite of what people think motivates their tipping calculations, the quality of service has only a tiny effect on how much a restaurant customer actually leaves as a tip. In fact, the percent tip left by a guest is as much influenced by whether the server (if female) draws a smiley face on the check, or predicts good weather, as by the guests’ happiness with the quality of service. As you read the study (a PDF of it is here) you see that, if you’re a server who wants to maximize your income, service quality should not be your focus.

Instead, a server who wants to maximize her tips first needs to maximize her personal sales. In a a time when the restaurant is not busy, this means using sales techniques to sell more food and drink to her guests. But when the restaurant is busy — which of course is the time when most people are in restaurants — the high-revenue server shifts her focus from maximizing sales per guest, to maximizing the number of guests she helps. In other words, she is better off financially, providing service to the highest number of guests, even if that stretches her capabilities past the ability to go a good job.

Here’s the underlying math of the whole thing. Let’s take a typical, Linkery-like restaurant (but one that accepts tips) where the guest spend average is about $25/pp, and our server can count on serving 40 guests in her five-table section on a busy weekend night.

  • At 21% average tip, her base level of tips is $210 before tipout
  • If she is able to increase her quality of service to top-tier, and things also go well with the parts of service she can’t control like the kitchen’s work, she would likely increase her average tip to 23%. Now she has increased her tips by $20, to $230 before tipout. She’s pretty dependent on the kitchen for this to work though, so she’ll probably tip out more to them in this case. I’ll estimate she ends up with a raise of $15 for the night.
  • If the server instead focuses on using the “Mega-Tips” techniques — such as calling the guests by name, touching them on the shoulder, squatting to meet the guests at eye level, and drawing smiley-faces on the check, all things which don’t require assistance from the kitchen — she’ll probably increase her tip average to 23% (or more) as well. In this case she’s less likely to increase her tipout to the kitchen, so she’s really increased her income by a full $20 for the night.
  • If she focuses on increasing sales to her section, she might get her guest spend average up from $25 to $28 — a very big increase from the business’ point of view. This, at 21% tip, would get her to $235, a raise of $22 from her original base.
  • Lastly, if she instead focuses her attention on increasing her section size — something which can be done in many ways, from coaxing/bullying the host or swooping in on tables, to emphasizing to the shift manager that it would save labor costs, or even telling a manager that the server next to them is overloaded and should cede some of his section — our server could bump her section from five, to say, eight tables, increasing the number of guests she serves in a night from 40 to 64. If she maximizes her section size, this will at some point stretch her to a point where her guests start getting poor service and are unable to purchase as much as they want. Let’s that happens here: sales per guest drops to $22 (a huge drop from the business’ point of view), tip percentage drops to 19%, and guests are less excited to return. This is a nightmare scenario for the business, and also lousy for the guests, but our server’s income before tip out has risen to $268, by far her highest yet. By pushing number of guests to the maximum possible, she’s made a raise of $58 on the night.

You can play with the numbers and scenarios to get slightly different results. But in general, in most restaurants, increasing the number of guests served is the surest way for a server to increase her income — even if the quality of service decreases markedly. This is because people don’t actually decrease their tip much for lousy service; and that total decrease is not nearly as much as the increase in total tip revenue gained by the server squeezing in some extra guests.

This is the plainest mathematical explanation I can give you to show that the tipping system, which is believed by customers to maximize quality of service, and believed by many restauranteurs to minimize the amount of supervision required of servers, actually works against the interests of both the guests and the business.

The business’s priority is for the server to create the best possible best experience (to increase future sales from return business), and also to focus on increasing average sales per guest (to increase that night’s sales).

The guest, in turn, would prefer the server focus on increasing quality of service (so the guest has a better time) without worrying too much about up-selling.

But the financially-driven server is motivated, by the math of tips, primarily to increase the number of guests she serves at once, and secondarily to engage in tip-increasing behavior which is specifically unrelated to the quality of the guests’ experience.

Which means that tipping incentivizes bad service, all while tricking us into thinking that it promotes good service.

Of course, just because servers are given monetary incentive to do a worse job, doesn’t mean that most, or even many, servers do less than their best. Most servers take pride in their work and do their best to create great experiences for their guests. It’s just that they’re often doing their best work in spite of their pure economic incentives, not because of them.

People are funny that way, they’re full of love and joy and wanting to connect with other humans and they like to go home and look in the mirror and feel good about how they touched people’s lives that day. In my experience, this was easier to achieve when tipping was removed from the equation.

Now, don’t get me wrong — nothing was perfect. In the Linkery’s existence I estimate we served nearly half a million guests. After half a million experiences, of course you can go online and hear from somebody, plenty of people, who had a bad service experience at the Linkery. We wanted to do great work for every single guest, but some percentage of the time, we failed.

When that happened, some guests concluded that the reason they got bad service was because their server didn’t have the prospect of a tip as motivation. But that is an easy conclusion that doesn’t really intersect with reality. If we, the managers of the restaurant, found that one of our team didn’t have motivation to do good work, that person would be gone in matter of days, if not hours. Just like they would in any (non-tipped) business. My whole livelihood was at stake! I had no intention of keeping team members who weren’t interested in doing a good job.

Instead, for us at the Linkery, service breakdowns were generally caused by something small. Maybe the server hadn’t gotten enough sleep. Or the previous night’s dishwasher forgot to do one of his dozens of closing tasks. Or a line cook showed up twenty minutes late for her shift that morning, or maybe even a farmer, a couple months prior, decided to grow less of a product than we would turn out to need for a summer Sunday brunch.

Restaurants, particularly restaurants that aim to serve good food, have countless moving parts, and a hiccup deep in the machine will often manifest itself at your table. It’s an enormous challenge to get everything to go right, which is why the restaurant business is so fun — when we are able to give someone a brilliant experience, it’s because dozens of people did their job to perfection, working in concert to make something beautiful. The rush of that accomplishment is why those of us who love the business, love the business.

In trying to make our service as consistently great as possible, we the managers would look at ourselves, our management choices, to see how our work might causing any problems. Was the schedule properly designed? Were we adequately training newly hired or newly promoted people? Could we put better systems in to help people succeed?

In looking at how we could better create a environment for people to do their best work, never once did we think, well, if we let the guests step in with random financial reinforcement every few minutes, that will help us work more effectively as a team! In fact, that would have been the last thing we wanted, in trying to help everyone succeed. Tipping would have made all of our jobs harder, not easier.

And that is the dynamic of tipping that, in my opinion, ultimately defeated us at our second, tipped, restaurant. I’ll tell that story in the next installment.

Click here to continue to Part 4.

Click here to read Part 1.
Click here to read Part 2.