As a consumer, one of the biggest sins you can commit is not tipping your server. Heck, we’ve all seen the viral social media posts with photos of receipts signed by customers leaving pennies on a steak dinner or simply crossing a line through the tip total. In the comments section, we lambast them—how could they do such a thing? Don’t they know how little money servers make per hour?
But as much as it’s ingrained in us to leave a tip for our restaurant servers, in American culture, this doesn’t translate across the service industry. When valet drivers return our car keys to us, we’ll hand them a couple bucks if we happen to have cash handy. Or for the cleaning staff at a hotel, we’ll consider leaving money by the TV if our families were especially messy during the stay. And what about front office staff at that same hotel, or the hostesses who seats us? Why don’t we feel inclined to leave tips for all service industry workers?
Some say it’s the “never seen, never tipped” mentality. We don’t think about the housekeeper who spruces up our room because we almost never see them, and because of that, we don’t feel guilty about it. Technology has also taken away the face-to-face aspect of many parts of the service industry. Casual restaurants have a pick-up counter where customers can pick up their lunch after ordering their meal on an app. We don’t have to call a restaurant anymore to make a reservation, thanks to online platforms. And checking out of a hotel? After you’ve packed your bags, you’re free to go.
But just because we don’t see these workers doesn’t mean the job isn’t getting done. It’s no secret that working in the service industry is not easy, whether it’s in restaurants, hotels, or hair salons. Having grown up with family members working in the beauty industry, I know firsthand that it can be a thankless job where you run into your fair share of not-so-nice clients. But when a customer is kind and says thank you with a tip, workers feel two things: motivation and appreciation.
As a business owner, these are two things you should strive for your employees to feel, both for their sake and your bottom line.
First, let’s talk about motivation, in terms of workers seeing their hard work translate into more dollars in their pockets. It’s proven that simply giving customers the option to tip the service worker has been proven to increase the amount of tips they receive. When we launched Tippy’s digital tipping platform in the beauty industry (mostly hair salons and spas), we noticed that people were leaving behind higher tips through the POS system because it was easier to click one of the existing percentages on the screen than calculating the tip on their own. Marriott launched the Envelope Please program, which places an envelope in hotel rooms to give customers the opportunity to leave a tip. They were one of the first big chains to do so. But that was in 2014, and now more than ever we are living in a cashless society. How many of us have found ourselves in a situation where we want to leave a tip, but we don’t have the cash on hand? And how many valet stations have we been to that had no other way to show your gratitude? The industry needs to utilize technology to create an atmosphere that politely encourages and results in more tips for our service industry professionals. After launching Tippy in salons across the country, our business has perfected the model and after processing more than $100 million tips we are studying how we can expand this to other industries – we’ve already began running betas in hotels.
A study came out in 2019 that only one-third of Uber customers left tips for their drivers. While that’s not an ideal number, I see it a different way. We forget the fact that the ride share service didn’t even offer the tipping option to its customers when it first launched in 2009. In 2018, the company hit $600 million in tips, money that was previously staying in customers’ pockets.
As for appreciation, for so long, it’s been undervalued by bosses across industries. But it shouldn’t be! According to a study conducted by Glassdoor, 81 percent of employees said they work harder when they feel appreciated! Some of the most successful businesses implement employee appreciation programs in their company structure. Workers spend almost as much time at work as they do with their families, so why not go the extra mile to make employees happy? In one case study at Harvard, they found that between two groups who were assigned to make fundraising calls, the group who received a pep talk from the director and told how grateful she was for their time made 50 percent more calls.
Customers, too, are more likely to add money to their tip when they feel a worker has gone the extra mile. For example, Compare Camp found that people will add an extra $5 to $10 when tipping their porter if they take the extra time to show the customer where everything is in their hotel room. Customers also tend to add in a few dollars more when tipping the doorman at a hotel if they hail a cab for them, if they have cash on hand. Imagine how much more income these service professionals would make if there was an easy digital option for patrons to tip them.
This past year, workers have had a reckoning in what they want from their job. As businesses reopen after a year of quarantine, employees want to work at a place where they are both appreciated and will bring home enough money to pay the bills. Another observation we made with service professionals using Tippy, they are able to create financial goals and receive updates on how close they are to reaching it with a banking platform attached to the app. Workers who used this were more motivated to work and felt that the system was a perk to their job and a way to increase tips. Others in the hospitality industry are recognizing this and adding savings and banking programs for their staff. In 2015, a Washington state senator and restauranteur sponsored a law that created a program allowing small businesses to offer retirement programs for their employees, a benefit that's typically out of reach for mom and pop businesses.
It's time. It's time for the service industry to take advantage of new tipping technologies to reach their end consumer. And it's time to grow a more inclusive culture for all to have the earnings and savings opportunities they deserve. What a way to incentivize potential applicants to apply to industry jobs!
ABOUT THE AUTHOR
David Tashjian is a venture capitalist and investor with roots in the University of Virginia’s Darden Graduate School of Business. His career started on Wall Street in 1982, where he built and ran high-yield trading businesses at both Salomon Brothers and Wasserstein Perella. In 1992, as general partner at Lazard Freres & Co he headed a group focused on global investments and later became Global Head of Debt and Equity Capital Markets and was appointed to the firm’s Global Executive Committee.
In 2007, Tashjian retired from Lazard to pursue venture capital opportunities. As co-founder and president of Linq3, he steered the company to secure long-term contracts with state lotteries and multinational corporations, eventually acquiring $85 million in funding and 70 full-time employees. In 2015, David co-founded DirectTips and its flagship app, “Tippy,” to bring that same innovation to the beauty and hospitality industry.