Restaurant Management: Use Creative Compensation Strategies

As if you didn’t have enough on your plate trying to keep your restaurant’s head above water this year, some in the food service industry are starting to talk more and more about changing some basic assumptions about employee compensation.

The traditional model has been to pay your kitchen by the hour depending on what they do, let waitstaff earn their living on tips, and maybe pay a hostess by the hour as well if you get too busy.  But as we’ve discussed here before, high turnover rates are a constant problem in restaurants.  You’re always going to have young people who are just “passing through” the restaurant industry as they look for the right time to start their careers, but in general managing and dealing with staff turnover takes up a lot of time and resources.

The worst part about turnover is that service suffers. And as any restaurateur will tell you, service probably suffers before that employee walks out the door.  Having employees who are not engaged in the long term interest of any company causes service and productivity to decline.

For these reasons some restaurants have begun to rethink their compensation plans. The best kind of compensation is the kind that motivates the employee to bring their priorities in line with the priorities and goals of the restaurant.  These strategies are different depending on whether you’re talking about Front of House or Back of House employees:

Front of House: Salary your waitstaff. Tips are so ingrained into the psyche of the restaurant industry that it feels weird to even suggest another compensation model.  And the initial knee-jerk reaction is to wonder how in the world a restaurant could afford the payroll for a salaried staff.  European restaurants have run with salaried servers for years.

The interesting thing about salaried servers is that their priorities completely change. When you are paid on tips, your two primary goals are to upsell customers to raise check averages and to turn tables over as quickly as possible.  Those two goals don’t really jibe with the restaurant’s goal of providing top-notch service every time that focuses on customer experience.

Salaried servers, on the other hand, feel no such pressure to turn and burn.  They are free to focus on maximizing customer experience every time, which means your pool of loyal, repeat customers will grow.  Typically a flat rate service charge is added to the bill that goes directly into payroll.  A smart restaurant owner would also include bonuses and incentives for salaried servers who are top sellers.

The best part about the salary method is that you enable and encourage career servers.  Turnover is almost non-existent because you provide a stable income for your employees.  The savings on new staff training and the ability to maintain a consistently high level of service can offset increased payroll costs.

Back of House: Share Profits. As you already know, the name of the game in your kitchen is efficiency.  The ideal kitchen doesn’t waste any food, uses minimal energy to prepare meals, and accomplishes all this so quickly that customers are never waiting.

In reality, that’s an almost impossible ideal to reach.  Your kitchen staff is paid an hourly wage, and they’re going to be paid that hourly wage whether they ruin an entire stock pot of the soup special or not.  Often their primary incentive isn’t the wage itself, which is probably nothing special, but the fear of losing their job.  Fear is a terrible incentive when it comes to encouraging maximum productivity and efficiency.

An excellent incentive to promote productivity and efficiency is profit sharing. Kitchen staff accumulate shares depending on how long they’ve worked for your restaurant.  Every quarter, a portion of the profits is divvied up among the kitchen staff depending upon how many shares they have.

I can imagine what you’re thinking: “First you want me to send my payroll costs through the roof with salaried servers and then you want me to share profits with my dishwashers????”

Imagine the same scenario I brought up above: an employee accidentally ruins an entire stock pot of the daily soup special.  All the employees in your kitchen are paid by the hour.  They shrug their shoulders and start making another batch, which costs you time (paying staff to do the same work twice), resources (all those ingredients will have to be reordered sooner), and efficiency (the gas/electricity needed to prepare the soup all over again and the lost work the staff doing the work over again could have spent doing something else).

In a profit-sharing kitchen, the sous chef who’s been working in this kitchen for 10 years and makes a couple grand every time the profit sharing checks go out takes it upon himself to show the kid who makes the soup how to do it right the first time.  It’s in his interest to cut food costs whenever possible.  Line cooks turn off half the range during slow periods to save on utilities and everybody uses portion scales to make sure there’s no waste.

You’ll probably find that even after you pay out the kitchen staff, your profits still rise because of all the savings a truly efficient, well-trained kitchen produces.  And your turnover rate will plummet, saving you training time and quality control issues with inexperienced staff.  Who doesn’t want a job that pays out a bonus check 3 or 4 times a year?

Do you think these incentive programs will make your restaurant a more successful business?  Leave a comment below and let us know what you think!