Bottom Line: Managers in restaurants and other service businesses can maximize sales by carefully filling teams with top performers and underachievers.
Given the continuing global boom in e-commerce and the rapid growth of retail in emerging markets, service-sector workers are increasingly important to the global economy. Yet worries persist about their relatively low productivity rates. The Organisation for Economic Co-operation and Development estimates that labor output and efficiency across service industries, including wholesale and retail, hotels, and restaurants, is only three-fourths of that in the manufacturing sector.
Some managers have resorted to teamwork to help bridge this gap, reasoning that workers will perform better if motivated and monitored by their colleagues. But there’s been little empirical research on whether employees’ positive traits rub off on their coworkers and, if they do, how to exploit any spillover effects. Indeed, many firms still view service-related staff members as largely interchangeable. As a result, service employees are often randomly assigned to teams or tasks, with little regard for their individual strengths or weaknesses.
According to a new study, however, team members with varying abilities can have a decided effect on their coworkers’ performance. When managers, informed by data analytics, carefully schedule their best and worst workers, they can arrive at the right blend of employees to optimize the value of every shift.
The authors set their study at a casual restaurant chain. They deliberately chose the food service industry because although servers work as a team, individuals possess a range of skills that can have a definite impact on their restaurant’s sales figures as well as their own income from tips. These workers also have similarities with many other types of multitasking service personnel, making the findings widely generalizable. In a highly competitive industry with a thin profit margin — restaurants’ margins typically range from 3 to 9 percent — a server who can enhance a customer’s dining experience can be crucial to a business.
After all, good servers don’t just emit positive vibes; they can speak knowledgeably about the food and beverage options and suggest suitable selections for specific diners. Whereas a below-average server might hawk the cheapest and most popular special, an attentive employee can maximize sales by keeping guests’ glasses full and persuading them to buy additional or more expensive menu items — upselling on wine and desserts, for example, or pushing the steak instead of the chicken.
Over an 18-month period, the authors tracked more than 226,000 transactions at three of the restaurant chain’s locations. After excluding the day’s top and bottom 7.5 percent of bills — thereby eliminating large parties, private events, and particularly stingy tippers — the authors analyzed sales and meal durations as a way to measure servers’ productivity. The more food and drinks sold in a short time, the better the server’s performance.
The authors uncovered a complex relationship between coworker ability and team performance. When staff members have generally low sales skills, adding a superstar to the mix will boost the team’s performance and the firm’s bottom line — but only up to a point. Adding too many sterling employees to a group, on the other hand, results in overkill. As a result, the link between coworker ability and sales resembles an upside-down U shape, with a peak that represents an optimal blend of below- and above-average employees.
In fact, the authors calculated, if managers at the restaurant chain in the study had managed to achieve that ideal scheduling mix, their total sales would have increased by 2.7 percent without incurring any additional hiring or staffing costs.
The findings show that managers can get the most from their employees by mixing up workers of varying abilities on the same teams or shifts. It turns out that those with lower sales skills will work harder in the presence of overachievers. And superstars will find their positive impact diluted if there are too many of them.
It turns out that those with lower sales skills will work harder in the presence of overachievers.
Peer effects are also stronger in close proximity, the authors write, meaning that managers “may consider placing the few high performers in more visible sections in order to maximize their positive spillovers” to below-average colleagues. Superstars also have a greater impact on smaller teams than on larger ones.
The finding that higher-ability servers not only extract more value from their own tables but also cause their coworkers to improve their performance is serious food for thought. Managers may want to rethink their compensation plans to retain and incentivize overachievers, the authors suggest, and bring data analytics to bear on scheduling strategies. Although it’s always tempting to look for the next superstar, merely managing the ones you have could provide a significant boost to the bottom line — at no extra cost.
Source: “When You Work with a Super Man, Will You Also Fly? An Empirical Study of the Impact of Coworkers on Performance,” by Tom Fangyun Tan (Southern Methodist University) and Serguei Netessine (INSEAD), INSEAD Working Paper No. 2015/88/TOM, Nov. 2015