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Compensation Practices in Restaurants and the Impact on Service Quality

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Abstract

America's eating and drinking establishments employ over 4.7 million food servers. Over 2 million of these employees earn approximately 50% of their income from tips. Empirical research in occupational and organizational commitment has identified a positive relationship between occupational commitment and employee turnover. Identifying the relationship between the use of tipping and employee commitment could have significant implications for service quality in the restaurant industry. Researchers have documented potential negative consequences of the practice of tipping that affect organizations, employees, and consumers.

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... It can serve as direct communication and feedback to the employee and management regarding the customers' service experience. Miller (2010) believes there is a high turnover rate in the restaurant industry due to compensation issues. The uncertainty of tips can be very stressful to waitstaff that rely on the additional income source. ...
... An outcome failure occurs when the core service is not delivered causing financial loss, or time waste for the customer. When a service failure has occurred and a service provider apologizes yet does not provide a fair resolution, customers are not happy or satisfied (Miller, 2010). identified interests with a return visit. ...
... This is because, by earning tips, employees feel appreciated by the company, thereby fostering employee commitment. In a study of 1,362 foodservice employees, Miller (2010) reported that compensating employees through tips had a significant effect on their commitment to the organization. From the above reasoning, it was hypothesized that: H 2 : There is a significant positive relationship between tipping and organizational commitment of hotel employees. ...
... Tips, or small amounts of money set and charged to customers in proportion to a total bill, are given to workers who provide some kind of service. Tips can be given before or after the service and are meant to be 'a little something extra', a thank you for a job well done, or a prompt for better service, and are considered a 'compensation practice' (Miller 2010 (Zelizer 2012: 164). Whilst the tip has an imbedded history of relations (in the premodern/feudal), it exists now within a neoliberal (modern/capitalist) paradigm. ...
Thesis
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This dissertation presents an ethnographic analysis of tipping in the restaurant sector of The Hamptons of Long Island, New York. Taking the form of a full participant insider ethnography, the research is based on in-depth semi-structured interviews with co-workers and in-role observations. The research took place in a small restaurant (under fifty employees) that served casual and moderately priced food and drink. The ethnographic research offers access to the processes of subjectivity formation, as well as to the economic relations produced by tipping. Tipping is a technique of labour control particularly suited to the neoliberal political economy. In this study neoliberalism is understood as a series of political, economic, and ideological practices that centre around individual and entrepreneurial freedoms, pure market logic, and consumerism. Those economic relations produce governable subjectivities for capital by making workers complicit in their own domination. This is done through a process of mobilization at the site of the server, whereby servers: 1) internalize a neoliberal logic and self-commodify; 2) are incentivized by the potential of working for tips; and 3) are informalized and individualized within their work and wage relations. Tipped workers are subject to a sub-minimum wage, which at the federal level is as low as $2.13 per hour. Some workers benefit from the tipped-wage system more than others, and those nearer to the top maintain the inequality and exploitation of this system as a whole. Tipping is both a post-Fordist technology that relieves capitalist companies from paying wages in full, and a neo-feudal master/servant relation of unequal dignity. That contradiction forces workers into an asymmetric relation outside of market neutrality. Tipping reinforces the hierarchies of class, gender, and race, and constructs an embodied labour that requires a sexualised selling of the self. 3 Acknowledgements and Dedication
... Diverse tipping practices are observed from culture to culture or country to country (Saayman and Saayman, 2015). It is reported that tipping in the United States food industry alone accounted for a $46.6 billion economic value (Azar, 2011), whilst 3 out of 4.7 million food servers employed in the USA earn some portion of their income from tips (Miller, 2010). With broader social-economic impacts, tipping has profound implications for labor economics as well as economics of information and management strategies (Azar, 2003). ...
... Interestingly, the idea of compensation in the form of a tip being an antecedent to employee commitment is not always positive. Miller (2010) suggests that tipping may adversely affect the employees' commitment and by extension, their tenure with an organization. A similar study by Curtis et al. (2009) speculates that the practice of tipping makes the employees more like subcontractors who prioritize excellent tips more than intrinsic motivators such as work interest, promotion room, and gratitude. ...
... Tipping behavior is not only influenced from various factors such as restaurant's environment, weather condition, type of payment, type of music played at the restaurant, but also from the customers' traits and genders (Seiter & Gass, 2005). Moreover, it is observed that there are a wide range of effective factors such as the amount of invoice (Rind & Strohmetz, 2001), amiability of employees (Lynn, Zinkhan, & Harris, 1993), service quality (Fernandez, 2004;Miller, 2010), gender of customers (Parrett, 2006), frequency of the service taken (Bodvarsson & Gibson, 1997), payment type (Parret, 2006), number of people at the meal (Rind & Bordia, 1996), ethnic origins (McCall & Lynn, 2009, communication skills of workers (Kinard & Kinard, 2013;Seiter & Weger, 2013), religious believes (Lynn & Katz, 2013), and alcohol consumption (Bodvarsson & Gibson, 1997). ...
Article
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Tip is the monetary amount that consumers voluntarily leave for the quality of the service they get. Whether a tip is left or not, and the amount of the tip left may result from different demographic and characteristic features of consumers. This study was conducted to determine the amount of tip left by the generations based on the personalized bills. Based on three different personalized bill types for a dinner for two people at a mid-quality restaurant, it was attempted to determine whether the costumers left tips or not, and if they did, how much was the amount. The data were gathered based on the quota sampling method in January and February 2018. The total number of the participants – selected from each gender and generation except for the Z generation in equal numbers - reached 414. The data were evaluated by descriptive statistics, chi-square analysis, one and two-way ANOVA. The findings indicated that the amounts of tips were significantly different depending on the generations and the personalized bills.
... Some of the occupations that derive benefits from tipping include street artists, bus and taxi drivers, washroom attendants, porters, casino croupiers, barmen, doormen, car guards, tour guides, field guides, delivery staff, golf caddies, exotic dancers and waiters and waitresses (Saayman, 2014). According to Miller (2010) 3 million of the 4.7 million food service sector employees in the USA earn an income from tipping. Statistics concerning the economies of tipping in other parts of the world are scant, which therefore makes it difficult to determine a comprehensive view of how many people benefit from tipping, but based on the meagre information that is available, it is clear that tipping touches the lives of millions of people in the industry. ...
Article
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The purpose of this research is to distinguish big tippers from other categories or types of tippers. In this context four types have been identified: those who do not tip, those who tip sometimes, those who tip regularly and those who always tip. A survey was conducted, during a National Arts Festival held in Potchefstroom, South Africa, where 400 questionnaires were distributed, of which 374 were used in the statistical analysis. Results confirmed that different types of tippers exist and that those who tip always are more affluent; the quality of the food as well as the quality of the service were identified as further determinants of tipping. This research determines the reasons why people dine out and how those reasons influence tipping. In addition, reasons why people tip or do not tip were identified. This is one of just four studies conducted on this topic in Africa and the first of its kind in South Africa.
... Some research has focused more directly on how tipping systems affect the human resource aspects of restaurant organizations. Research conducted by Miller (2010) suggests that the use of tips as a form of compensation may have a negative effect on an employee's commitment level, thereby decreasing retention levels. Lynn and Withiam (2008) suggest that although tipping may attract talented workers because of the high income potential it may also detract more "professional" workers due to the lack of income security. ...
Article
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Tipping is a well-established social norm in North American restaurants. Researchers have given considerable attention to the interaction between consumers and servers, but less so to the relationships within a restaurant and even less so to restaurant managers’ perspectives. Our study, the first of its kind, used interviews and a survey to explore the perspectives of both restaurant managers and servers in identifying operational issues arising from tipping. Inequity and unfairness, loss of control of service quality, and difficulties in succession planning and promotion were identified. There is clearly a need to investigate strategies to mitigate some of these impacts.
... Research that was conducted in the US has revealed that 10% of the population eat at a restaurant and on an average month, it totals 58% of the population (Lynn, 2006). Miller (2010) adds that 3 million of the 4,7 million people who are employed in the food services sector earn at least a portion of their income from tipping, which amounts to more than $27 billion per year (Azar, 2009). If one were to add people in other occupations within the tourism and hospitality industry who also benefit to some extent from tipping, such as parking valets, car guards, taxi drivers, porters, tour guides, field guides, exotic dancers, musicians, doormen, barmen, delivery staff, golf caddies and other artists/performers, the economic impact and value of tipping becomes mindboggling. ...
Article
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Tipping is an important source of income for a variety of occupations in the hospitality and tourism industry. One such occupation is waitressing and although much research has been done, especially in America, very little has been done in African countries. The purpose of this paper is therefore to determine the reasons why people tip or do not tip, as well as which socio-demographic and behavioural variables have the greatest influence on tipping. A survey was conducted at restaurants during the Aardklop National Festival, where 400 questionnaires were distributed. Results have shown that the reasons why people tip are financial, good service and social acceptability. Results have also revealed that more behavioural than socio-demographic variables influence the tipping decision.
... From an economic perspective, tips often constitute an important positive reward to employees for generating superior customer service quality that creates value for both the employees and the service provider (Lynn and Grassman, 1990;Chi et al., 2011). Nevertheless, tipping as a reward strategy may not always benefit the employee, and hence the service provider, because tips are non-contractual and voluntary, leaving employees inherently uncertain about the amount the customer will tip or not tip (Miller, 2010). This reward uncertainty can lead to employee wage insecurities (Butler and Snizek, 1976), lower occupational commitment (Lynn et al., 1993), increased employee conflict with the service provider (Eddleston et al., 2002), and even collusion and deviant behavior among employees and customers (Harris and Ogbonna, 2006;Lynn et al., 2011). ...
Article
Purpose – Many service employees rely on non-contractual voluntary customer tips as a major source of their income. The purpose of this paper is to empirically test the relationship between the service employee’s cognitive evaluation of the tip (expectations-disconfirmation tip gap), affective state (AS) and displayed emotions (DE) toward customers in the workplace. Design/methodology/approach – An experimental, between-subjects, scenario-based research design was conducted on 107 waiters in the US restaurant industry. A simple mediation model was first tested, before testing a more complex moderated mediation model that was developed to investigate if employees self-control (SC) moderates the relationship between the employees tip gap, AS, and DE. Findings – An employee’s negative disconfirmation tip gap negatively influences the employee’s AS, which in turn results in negative DE toward customers in the workplace. However, an employee’s positive tip gap does not positively influence the employee’s AS, relative to the control. In addition, employees’ SC does not moderate the relationship, which suggests that when employees experience negative tip disconfirmation they may openly violate the service provider’s display rules and service scripts, and display negative emotions toward customers in the workplace. Research limitations/implications – The scenario-based research design was limited to self-reported perceived levels of SC and DE. The scenario was also limited to one country and one tipping context (i.e. restaurants). Future studies could compliment these findings by conducting both qualitative studies, and survey research that relies on actual tipping data or re-enactments of actual service encounters. Practical implications – Service managers not only need to manage display rules and service scripts to influence employee DE, but also need to manage employee tip expectations, especially when employees expect to receive tips that are greater than actual tips (i.e. negative disconfirmation). Communicating and educating employees on customer tipping and what tips to expect should be central to managing employees who rely on customer tips. Originality/value – Tipping has received very little attention in the services management literature. This study broadens the focus of tipping research in the literature by presenting a more complex expectations-disconfirmation tip gap model.
... In addition, it is important to note the economic value of this type of activity; for example, in the USA, out of 4.7 million food servers employed, more than 3 million employees earn some portion of their income from tips (Miller, 2010). It is estimated that tipping in the USA and Canada generates in excess of US$40 billion per year, while in the USA alone it is estimated at US$27 billion (Azar, 2009). ...
Article
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There are generally three explanations for tipping: social approval, equitable service exchange and other reasons. The combination and importance of these reasons differ between countries and cultures. In this study, three distinct questions were asked. What influences the frequency of the tipping decision? What influences the magnitude of the tip given? Who is likely to tip more than the norm? A survey among diners was conducted at one of South Africa's largest arts festivals. Using regression analyses, this paper aims to identify the factors that influence tipping behaviour in South Africa. While most previous research has focused on motivational and/or psychological reasons for tipping, this research contributes towards understanding tipping from an economic perspective. The results show that the frequency of tipping and its magnitude are a function of the ability to pay. However, socio-demographics play an important role, especially in the paying of the above-normal tip.
... Despite these findings consumers still rank service quality as being very high, on average, for influencing tipping behavior (Azar, 2009). Literature highlights that monetary compensation in the form of a tip to the server may be an antecedent to employee's commitment to their occupation; therefore having an effect on the service quality they provide (Miller, 2010). ...
Article
The relationship between tipping and the service provided is not always linear. Factors such as demographic profile of the consumer, industry norms, and social norms affect the amount of tip. Results from the current study reveal that tipping varies when service failure occurs due to servers’ fault or organizational failure. Consumers with prior professional experience in the restaurant industry can distinguish between causes of failure, and tip accordingly. Consumers with prior professional restaurant experience were found to tip significantly more than those consumers that do not have prior hospitality experience. Tip rates for service failure due to organization failure tend to be higher compared with the service failure due to servers’ mistakes indicating that consumers do not penalize a server when the organization has caused the service failure.
... The first area focuses on the links between various facets of pay systems and individual characteristics, such as motivation (Wu et al., 2013), organizational justice (McQuilken et al., 2013;Wu and Wang, 2008), personality (Aziz et al., 2007) and related characteristics (Hon, 2012). The second area focuses on the organizational impact of compensation practices (Moncraz et al., 2009;Namasivayam et al., 2007) and industry segment (Torres and Adler, 2012) with particular emphasis on restaurants (Barber et al., 2006;Guillet et al., 2012;Miller, 2010;Murphy and DiPietro, 2005). Finally, there have been a couple of attempts to examine and account for external influences on pay systems (Croes and Tesone, 2007;Kline and Hsieh, 2007;Sturman and McCabe, 2008). ...
Article
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Purpose – The purpose of the paper is to present a review of the human resources (HR) research that has been published over the past ten years in discipline-based and hospitality-specific journals and identify key trends and opportunities for advancing future research. Design/methodology/approach – The paper takes the form of a critical review of the extant literature in the general HR management and hospitality HR management fields. Findings – A comparison of the findings shows a substantial degree of overlap in the themes and results that have been generated to date. However, several hospitality studies have identified a number of variables that appear to be particularly relevant for labor-intensive, service-focused settings. As such, context-specific factors should be considered in efforts to advance our understanding about the ways in which hospitality HR systems may impact a wide array of individual and organizational outcomes. Originality/value – The results offer a foundation for advancing future hospitality HR research.
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Purpose This research aimed to fill several gaps in the tipping literature which has overlooked the server's perspective in identifying and understanding variables that influence a tip amount and therefore where they concentrate their efforts during the service encounter. Furthermore, the extant literature has theorized how or why certain variables influence the tip amount, but these studies fail to capture insight from server's which would supplement the theory and provide a more in-depth understanding of the mechanisms at play. Design/methodology/approach This study adopts a grounded theory approach using semi-structured one-on-one interviews with tipped restaurant employees who were identified and selected using snowball sampling. Content analysis is employed to code and categorize the data. Findings The content analysis revealed five categories where servers focus their time and effort to earn tips: service quality, connection, personal factors, expertise and food quality. The server's personality was identified as a variable the tipping literature has largely ignored as a determinant of the tip amount. Server's shift their style of service for groups of eight or more people, and for regular customers, who must dine in the restaurant at least once per week. Lastly, despite the many drawbacks associated with working for tips, servers would not want to replace it with any other method of compensation. Originality/value This is the first qualitative study focused on understanding the server's role in the service exchange relationship since McCarty et al. (1990) study. The results provide new insights on the often-studied variables from the tipping literature.
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Restaurant server income is predominantly composed of tips received from guests and the minimum server wage received from restaurants. Grounded in equity theory, this study investigated the effect of the minimum server wage, in combination with service quality, familiarity, and perceived fairness, on tipping rate. An online scenario-based 2 (minimum server wage) x 2 (service quality) experimental design was conducted. Results revealed that the minimum server wage and familiarity with tipping have moderating roles on the indirect effect of service quality on tipping rate via perceived fairness of tipping. Findings provide new information to researchers and industry stakeholders on the effects of the minimum server wage on guest tipping behavior.
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If Iowa's restaurants are any indication, the service charge is going nowhere and tips will still be expected in most restaurants. But accounting for tips is immensely complex, due to federal regulations. This study of Iowa restaurants found that sales levels and waitstaff wages were both lower in rural restaurants than in urban operations. In both kinds of places, however, state and federal regulations were most influential in setting tipping policies. Some 29 percent of the restaurants surveyed reported adding an automatic service charge to customers' bills, and most of those were restaurants with high volumes located in urban counties. Most of the service charges applied to banquets or group business. Just 3 percent of the restaurants added a service charge to casual parties of any size.
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The effect of server posture (standing vs. squatting) on the size of tip left by restaurant customers was examined in two naturalistic experiments. In these studies, squatting down next to the tables increased servers’ tips from those tables. Both the practical implications of this effect and its similarity to other nonverbal effects on tipping are discussed.
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Tipping is a world-wide custom involving billions of dollars. The voluntary nature of tipping raises questions about why people tip. From a rational-choice perspective, tipping makes sense only if desired outcomes are contingent on how much is tipped. Three possibilities are that people tip in order to buy social approval, equitable relationships and/or future service. Hypotheses derived from these potential explanations for tipping were tested in a study in which restaurant customers were interviewed (as they left the restaurant) about their dining experience and tipping behavior. Tipping was related to bill size, patronage frequency, service ratings and the interaction of bill size with patronage frequency. Tipping was not related to group size, number of courses, alcohol consumption, food ratings or the interaction of patronage frequency with service ratings. These results are consistent with the use of tips to buy social approval and equitable relationships but not with the use of tips to buy future service.
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Diversity in the conceptualization and measurement of organizational commitment has made it difficult to interpret the results of an accumulating body of research. In this article, we go beyond the existing distinction between attitudinal and behavioral commitment and argue that commitment, as a psychological state, has at least three separable components reflecting (a) a desire (affective commitment), (b) a need (continuance commitment), and (c) an obligation (normative commitment) to maintain employment in an organization. Each component is considered to develop as a function of different antecedents and to have different implications for on-the-job behavior. The aim of this reconceptualization is to aid in the synthesis of existing research and to serve as a framework for future research.
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