Does tipping improve customer service?

The short answer is not really. The longer answer raises some interesting questions about customer service from tipped employees.

It is estimated that the impact of tipping on service quality is less than 2% in restaurants (Lynn, 2003). One of the main reasons is there are a lot of other factors that contribute to what customers tip.

In the United States, it’s customary to tip between 15% and 20% for restaurant service. This custom tends to bunch tips into this range.

Tips are based on the bill
Most people tip based on the total bill, which means you’ll tip more for the same meal if you order an expensive bottle of wine rather than iced tea, even if the service quality is the same.

Only exceptional service stands out
We only tend to notice truly outstanding or truly poor service. Unless our experience lands in one of those two categories, we’re likely to revert to our customary percentage.

These factors can also apply to other tipping situations such as shuttle drivers, valet parking attendants, and even your hair stylist. The tip is often determined by custom and/or the size of the bill unless you receive exceptionally outstanding or poor service.

Hidden dangers
Tipping can provide incentives for poor service if not carefully managed. Here are a few examples:

  • Employees may reduce their service quality if they believe a customer will tip poorly.
  • Employees may focus on behaviors that lead to tips at the expense of other tasks.
  • Cooperation and teamwork may suffer if employees become too focused on earning their own tips.

So, get rid of tipping, right?
Not so fast! Instituting a no tipping policy is by no means a panacea for service quality. A San Diego restaurant called the Linkery received a lot of publicity for implementing a flat service charge in place of tips, but their current Yelp rating is 3 out of 5 stars. (Check out the Linkery’s explanation of their no tipping policy.)

Service is Service
The lesson I take away is that people who manage tipped employees should pay careful attention to customer service issues, just as they would if they managed employees who didn’t receive tips.