In a recent protest walk-out by restaurant workers at Barrio, nine service staffers were fired for protesting an alleged lack of transparency regarding how management administered the tip pool intended to share with back-of-the-house workers. Barrio is a part of the Heavy Restaurant Group (HRG) which includes local eateries Purple, Meet the Moon, Pablo y Pablo and Fiasco.
In the Seattle Times, HRG founder and CEO Larry Kurofsky defended a corporate 80/20 tip split policy by sharing his “vision” on the matter. He believes the highest-paid employee in a restaurant should never make more than 2.5 times the lowest-paid employee, and that in many restaurants, the highest-paid employee is sometimes making five times what the lowest-paid employee does. Noticeably absent in Mr. Kurofsky’s vision is the pay ratios of corporate employees (including the CEO) and restaurant staff.
Although small corporate entities by nature have much tighter margins than large ones, the average ratio of S&P 500 CEO pay to that of front-line workers, as tracked by the AFL-CIO, is 324 to 1. Granted, this figure relates to larger corporate firms, but the point here is if Kurofsky really wants credit for being a visionary, then a transparent relationship between his pay and that of his front-line workers might give a better idea of how fairly everyone is being compensated.
Corporate equity and transparency are the core issues, since as servers’ “tipping out” the back line help is nothing new. What is new is the method. The old construct, when tipping was largely a cash affair, was for front-line servers and bartenders to “tip out” the hosts, food prep, and clean up crew directly. This was done solely at the discretion of the server, leading to natural inconsistencies. It also presented the picture of largely foreign-born back line workers relying on the largess of largely white front-line employees. In recent times that model has fallen away, replaced by a centralized system that aspires to be more consistent, transparent, and equitable.
This case doesn’t appear to be a reluctance on the part of front-line workers to help the back-line help. More important is how much trust employees have in management’s compensation processes. While there is no evidence of wrongdoing in the Times’ article, the employees interviewed do share a common frustration over how the process is administered. A lack of transparency naturally leads to suspicions that management is skimming for one reason or another (a “service fee” for example).
Then there is the larger issue of how poorly back-line workers are compensated. Clearly it is fair for front-line workers to share the earnings from their work since it would be impossible to do their work without the back line support. Traditionally, servers receive tips based on the quality of their direct customer interface at “the front of the house.” The “back of the house” workers have always been amongst the lowest paid. A management “vision” that forces front-line workers to share tips with back-line staff may appear to be a thinly veiled attempt by management to make up for the paltry wages in the kitchen. (Chefs are considered management and not a part of this evaluation.)
The solution seems simple – show the workers the books. Instill trust by extending a corporate “vision” to the compensation of all employees, including the CEO.