Case Study: The Challenges of Eliminating Tips
Danny Meyer is the CEO of Union Square Hospitality, the most successful New York restaurants. He decided to get rid of the tipping culture in his restaurants. This largely impacted both customers and employees. It affected employees’ paycheck, as well as the customers’ check. Danny Meyer saw the negative impact of tips on his employees’ career. In fact, they had no chance to advance because of the pay cuts.
He explained to both employees and customers at the town hall that all employees need to be fair and treated equally. He talked about the importance of fair wages.
By eliminating tips, Meyer was able to increase the paycheck for his employees and were able to fill more cook positions in the industry shortage. Importantly, he was successful in hiring employees with the purpose to deliver exceptional hospitality. He wanted to have a good relationship with his employees. He is continuously working with his employees to get feedback from them and seeks to communicate well with them to ensure that his employees feel best in the work.
The questions we are asked to answer in this case analysis: What type of change is this, transformational or incremental? What levels of change is Meyer aiming for in this case and what models are consistent with Meyer’s process for designing and implementing the change?
Problem
Based on David Meyer’s findings on the tipping culture at his restaurants, it can be said that the issues he is concerned with are the imbalances in terms of paychecks between the restaurant crews. Front-line employees make more money aided by the tipping structure, this then factors those employees to remain in those positions. The purpose of the change is to improve the ability of employees to contribute in ways that increase customer and employee experience, which may include equal wages for the employees, and to share the workload among each other as more employees can be hired, which then enables employees to move up in positions without facing a big reduction in income. The type of change Meyer approached was incremental​ change, which by textbook definition is, “small​ refinements in current organizational practices or routines that do not challenge, but rather build on or improve, existing aspects and practices within the organization.” Meyer​ seeks to change the tipping structure within his organization, which can be categorized as an organizational practice or routine, and the impact of that change enabled other processes within the restaurant such as cooking, to be improved as he was able to hire more cooks.
The level of change planned in this organization includes group-level​ change as well as organization-level change​. Meyer requires his employees to be able to work together much more effectively to improve the processes in the restaurants. The previous tipping structure made the work environment more individualistic as only front-line employees receive rewards in the form of tips even though other employees are involved in making sure customers have a positive experience. As the tipping structure is done away with, the whole team is responsible to enable customers to have a positive experience at the restaurant, therefore, requiring teams or groups in the restaurant to have good relationships and “take care of each other” as Meyer mentioned and in this way, rewards are shared in the form of equal pay and probably good restaurant review. In terms of organization-level change, Meyer hopes that employees will work on moving up in positions as they increase in experiences. Meyer was also able to fill more cook positions which he said, “address a common industry shortage.”
The concepts of Kotter’s Model are more consistent with Meyer’s process for designing and implementing change as well as the Appreciative Inquiry Model. Meyer's initial approach is consistent with Kotter’s model in that he created a sense of urgency by having town halls before any publicity was released, he created a vision of the changes he desires to make and how employees are to aid in the change. Meyer communicates the change by asking employees to take care of each other, this effective communication also helps reduce the resistance he might face which would be the front line employees rejecting the loss of their bigger paycheck due to tipping.
As the change is anchored, Meyer uses the Appreciative Inquiry Model ​as he continues to use feedback from his employees which make employees feel heard and appreciated, these feedbacks can also be used for other future changes. Meyer’s efforts have the potential to help teams among the restaurant employees to be able to work effectively and together as they are on board with the changes which is the result of the employees being informed well, and involved in the change.
Solution
Inconclusion
Charles Kettering said, “The world hates change, yet it is the only thing that has brought progress.” We would like to close with this thought and say that Meyer is a remarkable leader. He sees change as an opportunity to improve as a company, as well as individually, and for his employees to become their very best selves. He isn’t afraid of inconvenience when it comes to posting new ideas that may seem to provoke for some people. This is why we are taking this class. We need more Danny Meyer in the world who is constantly thinking of ways to help his employees grow. We need more employees who are willing to embrace change. Change is necessary.