Why Tipping Harms The Customer Experience

Danielle Beurteaux

Small business owner working in diner.Danny Meyer, the famous chef whose Union Square Hospitality Group includes upscale restaurants Gramercy Tavern and The Modern recently made news for banning tipping in all the organization’s restaurants (which he’s been trying to do for about 20 years).

The discussion about restaurant tipping has been a hot topic over the past few years, as its inherent unfairness – coupled with debate over fair wages for front and particularly back of house staff – has prompted some owners to try out the no-tip environment. We could even call it a trend. Some have reported success, both in terms of staff happiness and profitability.

Tipping, why can’t we quit you? The digital economy is starting to challenge tipping as the status quo. On-demand services like Uber don’t allow tipping. Instead, digital feedback has become the dominant performance reviewing tool, whether that’s on a reviewing site or on a company’s app.

But there is still a notion that tipping is a good idea because it rewards performance and offers servers the potential to make a lot more money than if they were on salary. But both of those ideas aren’t actually true (quite). The latter, first: Only a pretty small percentage of servers make more than the $40,000 a year average (less outside of New York), and only those at the types of very high-end establishments, which represent a small proportion of restaurants. In fact, many servers aren’t doing well at all.

The wrong motivation

The second point: For tipping research, look to studies done by Michael Lynn at Cornell University’s School of Hotel Administration. One found that “tips are only weakly associated with service quality.” Another by economist Ofer Azar found that psychological motivations were more linked to tipping than service performance, as experienced by one restaurateur when he declared a tipless experiment, which a certain portion of the clientele resented.

Tipping is, in fact, counter-motivational. This research can be applied more broadly than just restaurants. Employee rewards are really about the war for talent.

War for talent

Even in the culinary space, which has seen an enormous influx in restaurants and culinary school graduates over the last decade or so, is now having supply-and-demand problems. The chefs and restaurant owners of tomorrow are MIA or quitting because of tough working conditions (you try chopping onions for hours at a time in a high-pressure, hot kitchen), low pay, lack of benefits, and work culture. Providing better, consistent pay, along with benefits, creates a better business culture.

Employee engagement

Several restaurateurs have said a motivation for a tipless establishment was to create a better employee culture across the board, where the stability of a salary helps servers, lessens turnover, and makes employee development more realistic.

Don’t underestimate security

While some servers admit to being initially unenthusiastic about switching to a salary, some report their worries were unfounded – they’re still making about the same. Further, they appreciate the sense of security.

So while some diners and servers want to keep the status quo tipping in place until it’s pried out of their cold, rigor-mortised hands, the discussion about restaurant wages will continue to spill into the larger conversation about how workers are compensated and what that means for the bottom line.

For more on how the digital revolution is changing how we work and play, see 99 Mind-Blowing Ways The Digital Economy Is Changing The Future Of Business.

Danielle Beurteaux

About Danielle Beurteaux

Danielle Beurteaux is a New York–based writer who covers business, technology, and philanthropy. Her work has appeared in The New York Times and on Popular Mechanics, CNN, and Institutional Investor's Alpha, among other outlets.