Danny Meyer broke the internet recently when he announced he would be eliminating tipping in his restaurants. He’ll be replacing traditional gratuity with a ‘hospitality included’ program where menu prices are reflective of the cost of each item, supporting sustainable compensation across Front and Back of House. Meyer is not the first to ditch tipping, but he is the one person who could bring the conversation to the forefront en masse.
A radical overhaul of restaurant compensation is absolutely needed. Back of House pay isn’t enough given the rising costs of living in cities. Tipping, though it may generate adequate wages, impedes evolution in the industry and, frequently, growth opportunities for service staff. As the industry charts a new course the conversation must include more than compensation. Countless servers and cooks have found their calling in restaurants despite the flaws in the current compensation system. Wages need to increase, but to bump up pay without recognizing there is more to fulfillment in work would be a mistake.
Three TED talks offer insights from 250 years of study around productivity, fulfillment, and engagement in work. Though none of these talks is about the restaurant industry specifically, the messages are absolutely pertinent. As the industry looks to overhaul a broken system, there’s a wealth of research and knowledge to help guide.
Barry Schwartz on Finding New Carrots
So much of our current thinking about work is informed by Adam Smith’s writings from Wealth of Nations from 1776. This nearly 250 year old book is at the core of the ‘carrot and stick’ approach that has governed management thinking almost ever since. Interestingly, restaurant economics often limits resources for ‘carrots’ (average net income for full service restaurants nationwide is currently 6%). Top operators and employers have had to find non-monetary methods for ensuring engagement and fulfillment for their team members. Over the past 10-15 years, education has been the primary mechanism for this. Schwartz has a short book, Why We Work, that speaks specifically to restaurants and other service work in incredibly insightful ways.
Dan Ariely and What Makes Us Feel Good About our Work
Dan Ariely is a behavioral economist and master experiment designer. He also references Adam Smith by contrasting his thinking against Karl Marx. Ariely highlights the pursuit of efficiency (Smith) at the risk of alienation (Marx). Throughout the industrial revolution companies sought greater efficiency to gain a competitive advantage. Henry Ford’s assembly line led to cheaper cars, but was also a source of alienation. Assembly line production commoditized the worker, shifting them from ‘maker’ to cog.
Eliminating tipping alone is not likely to solve compensation problems. Meyer alludes to a price increase beyond covering gratuity. Establishing sustainable wages throughout the industry will likely include charging more, but there is a ceiling imposed by competition in the marketplace. This may be less true for Danny Meyer’s restaurants, but is definitely the case should a broader swath of operators look to replicate the approach. Owners and operators will look for greater efficiency to maintain competitive pricing. Many service and kitchen employees find joy and meaning in their work precisely because they do not feel alienated from the end outcome.
Dan Pink and The Puzzle of Motivation
In this talk about intrinsic vs. extrinsic motivation, Pink presents the candle experiment in the context of complex problems of the knowledge economy. In the experiment, participants must affix a candle to a wall with only the candle, matches, and tacks in a box. The solution is to affix the box to the wall and melt the bottom of the candle to attach it to the box. The complex version of the experiment has the tacks in the box as the participant must overcome functional fixedness, the tendency to ignore the box when it is just a holder for tacks. In the simple version of the experiment participants solved the problem faster with monetary incentive. In the harder version, adding monetary incentive led to slower solutions. Anyone who has ever tried to teach a young cook how to prioritize their prep day or a host how to disarm an upset guest can speak to the inherent complexity. His lessons are no less relevant in restaurants, but the compensation structures and levers are different.
Pink’s talk, taken in conjunction with Schwartz’s, offers the best recipe for designing the future of fulfilling restaurant employment. He does not prescribe an order to these but there is one for restaurants- Purpose, Autonomy, Mastery. The carrot, in this equation is Mastery, but without purpose and meaning the carrot is pretty bland. Autonomy supports meaning through personal development and learning. Autonomy, the freedom to test, make mistakes, and shape the approach to work is also critical to mastery.
- Reinforce Purpose and Meaning in the Work: Great restaurants have done this through product sourcing, culinary creativity, impact on the happiness and well-being of others, beverage education, camaraderie, etc. There are many more avenues around teaching emotional intelligence, empathy, and other critical skills for modern work.
- Design for Autonomy: In a kitchen this can be a garde manger proposing the night’s amuse bouche or a sous chef running specials. In a dining room it’s a server having the freedom to pour a splash of Muscadet for a guest with oysters. In management maybe it’s planning a creative pre-meal or just room to make mistakes.
- Promote and Recognize Mastery: Eleven Madison Park has done this exceptionally well over the years. A server with a curiosity about tea is given the autonomy to pursue it and achieve a level of mastery. The restaurant celebrates this both internally and externally.
To be clear, this thinking is a necessary complement to addressing wage issues. The system of compensation in restaurants is deeply flawed and those who are trying to fix it should be celebrated and supported. Danny Meyer’s is hopefully one of many approaches that will be taken in the years to come. His organization’s culture of Enlightened Hospitality is aligned, philosophically if not explicitly, with the thinking in these talks. For those who want to tackle compensation in their restaurant who might not have that culture so embedded, hopefully these talks can be helpful in designing systems that avoid some of the mistakes of the past in other industries.