Tipping: How to Share the Wealth?

Tipping is a special part of American hospitality culture. Most aren’t aware that the term ‘tip’ originated as an acronym: to insure promptness. Anyone who has ever dined in New Zealand, where tipping is not customary, knows what it’s like for your order to take 45 minutes at a coffee shop and two hours at any full-service restaurant. Most would agree that tipping culture elevates the restaurant world, as well as many others, to higher levels of service.

On the other end of the spectrum, tipping can tear a service staff apart. Servers can upsell without shame to drive up an average check and their corresponding tips, alienating customers as a result. Some groups will shun those who don’t ‘pull their weight,’ driving down workplace culture. And then there’s the clash between the front and back of the house and corresponding laws, where chefs may feel that they’re being cheated out of the tip pool.

So how do you capitalize on your service staff’s tip-based motivation while keeping your product and culture at bay? Best to think critically about your staff and how the following internal tipping models can apply:

Pooled House
One of the most common tipping models is a pooled house, where every service staff member will combine their tips into one ‘pool’ and then split the total evenly among themselves.

The pros:
A pooled house is the best way for everyone to hedge their performance. People have good days and people have bad days, and this allows everyone to find a happy medium. It also allows beginning servers to enjoy greater monetary rewards earlier on, motivating them to learn from senior staff.

The cons:
Top performers will feel weighed down, not wanting to continue pushing themselves if their extra tips are going to be fractioned off later on. In some circumstances, especially where most of your business is cash, some servers may not report all their tips in the first place.
Use this model if…

• Your staff enjoys a positive, open and honest team culture
• Your transactions are largely non-cash
• Your staff performs on a relatively even level across the board and there are no consistent slackers

Individual Tips
In this model, servers keep all of their own tips, splitting them only with designated team members such as bussers, chefs and others who work in their sections.

The pros:
Allowing servers to keep their own tips rewards top performers and motivates them to continue exceeding expectations. On the other end of the spectrum, this model can also motivate underperforming servers to up their game, knowing that they won’t be able to lean on their peers to pick up the slack. Also, if a server is nefarious enough to not report their tips, this will not have as large an effect on the entire staff [though you should absolutely intervene for the benefit of the bussers and other support staff].

The cons:
This model could lead to higher turnover, with underperformers seeing additional factors as preventing them from increasing their tips—not being assigned the right sections, getting skipped over for ideal shifts, etc.

Use this model if…

• Your staff is more polarized in skill level
• You can risk higher turnover for low performers to preserve your top performers’ longevity

Hybrid Model
This approach combines the first two methods into a system that can potentially mean the best of both worlds. Here, it’s really up to the management team to tweak distribution in a way that best suits their staff. There’s nothing set in stone about a hybrid model, so more critical thought and analysis is required.
A basic example would be for the staff to pool half their tips, with individuals allowed to keep the remaining 50%. Top performers would still take a bigger piece of the pie, but underperformers won’t feel as down and out.

The risk, however, is that you can potentially endure the cons of both models. You may still have staff members not reporting tips, and those at the low end may still feel alienated. Meeting in the middle may be a win-win, but depending on your staff’s perceptions it could be a lose-lose.

The key here is understanding your staff. If you’re thinking about changing your tip structure, talk to the people who you think will have the biggest voice in private. They will be your most valuable tools in determining which model to go with.

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