As I was signing the credit card slip last week, I mentioned to the dentist that he was missing out on a sure source of revenue to the tune of about 18%.
“How? That would double my profit margin.”
“Above the signature, add a line for a tip.”
Ah, the simple solutions are often the best. We had a polite, if maybe just a little strained, chuckle.
Tipping has always struck me as a bad way to run a business because it doesn’t reinforce the virtues that Boyd associated with superior performance in organizations. As you might recall from Certain to Win, for example, these included his EBFAS climate and his “Theme for Vitality and Growth,” IOHAI. In particular, it doesn’t seem to do much to promote teamwork, such as wait staff pitching in to help out when one waiter became overloaded, or taking the initiative to solve non-wait-related problems in the restaurant (like tidying up common areas or making suggestions for improvement — kaizen).
Plus, it reinforces a caste system, with some staff on straight hourly wage, some on salary, and one particular group on sub-minimum wage plus tips. Not good for Einheit.
But then, the restaurant business isn’t one I know much about; I don’t have any Fingerspitzengefühl for it.
Turns out, though, that I may be right. Check out restaurateur Jay Porter’s article, “After I banned tipping at my restaurant, the service got better and we made more money.”
Note the conclusion, which might come straight out of Boyd:
By removing tipping from the Linkery, we aligned ourselves with every other business model in America. Servers and management could work together toward one goal: giving all of our guests the best possible experience. When we did it well, we all made more money. As you can imagine, it was easy for us to find people who wanted to work in this environment, with clear goals and rewards for succeeding as a team.
One you have everybody together as a team, you can start investing in people and really get the benefit from Boyd’s climate. You may even be able to evolve an implementation of the principles that underlie maneuver warfare and the Toyota Production System/lean production. History suggests that if you do, you’ll wipe the table with the competition (a little pun, sorry).
One concern, is that in the tip, commision and bonus based economy, there maybe
rather little real value, and wealth creation. We’re just moving money around, but not
adding much value.