What’s wrong with tipping?

Danny Meyer, CEO of Union Square Hospitality, which runs some of the most successful New York restaurants, saw firsthand the largest negative impact of a tipping culture: employees in front-line service positions that are very reliant on tips for compensation feel they cannot advance to management without taking significant pay cuts due to loss of tips. His solution was to eliminate tips at his restaurants. But how would customers react to new prices and would servers worry about their overall pay?

Meyer began by first involving the affected employees in town-hall talks. These town halls happened months before any publicity was released. Meyer then hosted town halls with customers to explain the importance of fair wages for all his employees at the restaurant, not just the few who served the food. The transition period for each restaurant to eliminate tips was usually three to six months.

As a result of eliminating the tip structure in most of his restaurants, Meyer has been able to increase the pay structure for cooks at those locations, which enables him to fill more cook positions and address a common industry shortage. Meyer has also been able to hire employees with attention to deliver exceptional hospitality. Meyer encourages his employees to take care of each other first, and to then take care of the customer, which creates a virtuous cycle of hospitality.

Meyer constantly uses feedback from his employees even after the tip structure was eliminated. He wants to ensure that each employee feels their voice is heard and understood. Employees continue to have access to town-hall meetings and internal feedback channels to offer honest feedback.