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Transcription of interview with Michael Lynn on September 9, 2013.
Douglas Goldstein, CFPÆ, Financial Planner & Investment Advisor
Michael Lynn is a former bartender, busboy and waiter whose now become a professor at
Cornell University School of Hotel Administration. He had done a huge amount of work and research
about tipping.
Douglas Goldstein, financial planner & investment advisor, interviewed Lynn on Arutz Sheva Radio.
Douglas Goldstein: Your specialty is in the study of tipping. Isnít that rather an outdated
practice? Wouldnít today it be more logical for people in restaurants letís say just
do add the service charge into the overall bill?
Michael Lynn: Tipping has been around for a while and it doesnít look like itís going
away anytime soon so I wouldnít say itís outdated. Are there better systems? Is it
better to bill the price of service into menu prices at restaurants or should you charge
a service charge? It turns out those are pretty complex questions to answer. If you ask consumers
in surveys, theyíll tell you that they absolutely hate automatic service charges and for the
most part, they donít like tipping either and if you say should restaurants pay their
staff a [level of] wage, theyíll say yes, but if you throw in would you be willing to
pay higher menu prices for that to happen, theyíll start saying no again.
Douglas Goldstein: Isnít that the same thing paying a higher menu price and adding 15 or
20% of the tip?
Michael Lynn: No, if itís going to cut into the restaurantís profit, thatís okay with
me. I just donít want to pay it myself. It seems to be the attitude that consumers are
taking. So itís even hard to answer what consumers would prefer because they seem to
have this illogical and inconsistent attitude. Tipping has a lot of effects. Iíve done research
that documents that tips in fact do motivate servers to deliver a better service especially
more personalized service. If you add the price of service into a menu price, it turns
out consumers will in fact perceive a restaurant with 15% higher menu prices and no tipping
as more expensive than a restaurant with the lower prices but youíre expected to tip and
thatís true even if the people generally tip 20%. In fact, the first restaurant would
be the less expensive for them to eat at but they perceive restaurant expensiveness based
on the menu prices alone.
Douglas Goldstein: How is it that restaurant servers get this and in certain areas, you get tipping but in other
areas, salesman in a clothing store, why donít you tip him?
Michael Lynn: Thereís very little research on the topic and only a couple of theories.
A common missay that we tip those people for whom itís more efficient for the customer
to monitor and reward performance then it is for the company to do so. At counter help,
itís a fairly standardized product. The manager can see whether the orders are being taken
in expeditious and accurate manner. Itís easy and efficient for the company and management
to monitor counter help. Restaurant servers are waiving more on people who are scattered
throughout the restaurant, those customers have very different wants and desires. I,
for example, donít like servers to spend a lot of time talking and chatting with me.
I bring my own dinner companionship with me, but other customers do like that. So a manager
doesnít know whether a table was being ignored or their wishes are being granted by the server
who leaves them basically alone. Itís very difficult for management under those circumstances
to figure out who is doing a good job and who is not and itís easy for the customer
to say, ìYeah, Iím being served in the way I want.î So a common [misargue] tipping exist
because there are some circumstances where the customer can monitor a reward performance
better than the employing firm.
Do we tip people as a genuine desire to help them reward service? I would say not really.
Think about it, you said that you went through a toll booth and this was a pleasant person
who took a drudgery kind of thing and made it lighthearted and not so bad and you didnít
tip him, why? Because itís not normative regardless of the fact that in fact, he did
a small service for you. Ultimately, mostly we tip people because itís expected and we donít want
the disapproval that comes with violating social norms. Then the question is why do
we have the norms that we do and why is it normative to tip restaurant waiters? Thereís
an anthropologist in California, George Foster, who believes that tipping is a way for forestalling
envy that itís natural for service workers to envy their customers because after all,
theyíre working and their customers are often on vacation or eating and dining. Tipping
evolved as a way for the customers to say ìHey, donít envy me that Iím having a good
time and youíre slaving away. Hereís some money, go have a drink later.î In fact, the
word for tip in many languages around the world does translate to drink money, tea money,
money for drink and that sort of thing.
Douglas Goldstein: For example you go to a masseuse where really working on just making
your back feel better and I feel guilty. Is that the correct emotion to feel?
Michael Lynn: Iím not in that business but Iím like you, I feel uncomfortable sometimes
being served by people and do I believe I might tip as a way to kind of relieve some
of the guilt and uncomfortableness, maybe yes.
Douglas Goldstein: You show up in the restaurant. How much did you tip?
Michael Lynn: In the United, 15-20% of the bill.
Douglas Goldstein: Does that depend on the service or anything else or is that just kind
of given?
Michael Lynn: Where you tip within that 15-20% should be dependent on service but you should
always tip at least 15% in the United States.
Douglas Goldstein: Do waiters and waitresses actually calculate when he tipped me 14 or
17 Ω or do they just pick it up off the table and move on?
Michael Lynn: I think what they do is they know what 15 and 20% is and they say, ìHe
tipped me on the generous side or on the [inaudible 0:09:57] side.î They donít calculate the
exact percentage but theyíll know if itís less than 15% or theyíll know if itís closer
to 20% and theyíll have an emotional reaction of course.
Douglas Goldstein: Letís say you get a crummy service and you want to teach them a lesson.
They say ìHe only gave 15î or ìHe only gave 5î or nothing and say ìI guess I did
a bad jobî or do you think the servers donít really pick up on that?
Michael Lynn: First off, itís difficult for servers to know themselves whether theyíve
done a good job or not. I waited tables to pay my way through school and I tried collecting
data on my own customers and among other things, I tried to rate the quality of my own service
to see if my perception to service quality predicted tips and it turns out, I had a hard
time judging. I basically did a descent job and it was very rare that something extraordinary
happened that I go ìThat was outstanding serviceî but never did I give really horrible
service either. I think that most service is in the United States, good, not great but
good and doesnít vary a lot in itís hard for servers to know themselves whether theyíve
given good service or not which makes it hard for them to see is there a relationship between
the tips I get and the service I deliver. They do see that there are vast differences
between customers and tip amount so if a server gets a small tip, I think they are far more
likely to attribute it to the characteristics of the customer than to their own service.
Douglas Goldstein: What got you into study this specific field of economics?
Michael Lynn: First, I paid my way to school waiting tables and I noticed that there are
a lot of other servers who are making more money than me and I didnít think they were
better servers so I was just kind of curious whatís going on and it turns out that what
was going on is they were better at establishing rapport with the customer than I was. I spent
all of my energies in the technical aspects of service and not the social ones but itís
the social dimension thatís most important for getting a tip.
Douglas Goldstein: If you are advising a waiter on one thing he could do tonight to increase
his tip what would you suggest?
Michael Lynn: Establish a rapport with that customer, how do you do that? Introduce yourself
by name, smile a lot, squat down next to the table, touch them on the arm. If you happened
to know their name because they give you their credit card, thank them by name when you deliver
the check, whatever you can to establish some social connection with them.
Douglas Goldstein: How could people learn more about your work?
Michael Lynn: I have a website www.tippingresearch.com and if they Google that, theyíll find it.
Douglas Goldstein, CFPÆ, is the director of Profile Investment Services and the host
of the Goldstein on Gelt radio show (Monday nights at 7:00 PM on www.israelnationalradio.com.
He is a licensed financial professional both in the U.S. and Israel. Securities offered
through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA, SIFMA. Accounts carried
by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company.
His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered
at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.
Disclaimer: This document is a transcription and/or an educational article. While it is
believed to be current and accurate, divergence from the original is to be expected. The original
podcast can be heard at https://sites.google.com/site/goldsteinradioshows/. All information on this website is purely
information and should not be used as the sole basis for making financial decisions.
The opinions rendered herein are those of the guests, and not necessarily those of Douglas
Goldstein, Profile Investment Services, Ltd., or Israel National News. Readers should consult
with a professional financial advisor before making any financial decisions. Please see
the complete disclaimer at https://sites.google.com/site/goldsteinradioshows/.