Posted on May 6, 2011
Restaurant industry is probably one of the last places to look for innovations: the industry has not really changed much in the last 200-300 years. The same poorly paid waiters service the same customers and work for the minimal wage plus tips. One relatively major change that happened some years ago is the introduction of POS (point of sales) systems which provide a wealth of data on everything that is going on in the restaurant: meals served, checks paid, tips earned etc. Some of the better restaurant chains started using this data to schedule waiters according to customer demand to help simplify life of managers who used to allocate waiters to days and tables manually. But there is a new, innovative workforce management solution out there which takes this game to a completely new level. It promises to dramatically increase productivity in the industry where productivity has not changed for ages.
Dale Carnegie, in his now famous book “How to Win Friends and Influence People” describes a fascinating story about Charles Schwab (not the banker but the one with the “real” job: steel mill manager). To motivate staff at one of the mills, the story goes, Schwab chalked a number on the floor indicating how much work the previous shift has done. When the next shift came and learned about what the number means, they worked hard to beat this number and write the new one on the floor. The next shift did the same until the mill became the most productive in the company, despite the fact that neither threats nor rewards could achieve the same effect. “The way to get things done,” said Schwab, “is to stimulate competition. I do not mean in a sordid, money-getting way, but in the desire to excel.”
This fascinating story is operationalized by the company called Objective Logistics, a startup out of New Bedford, MA that I have been advising for the last couple of years. The idea behind the company is one of the best examples of the Renaissance Innovation. Demand at a restaurant is notoriously risky (just visit your favorite place on Monday vs. Saturday) and how much money a customer spends greatly depends on the promptness of the waiters, their ability to upsell and cross-sell and their ability to please the customers. At the same time, earnings of the waiters greatly differ by the time of the day and day of the week and most waiters perceive their jobs as temporary, with turnover reaching 200% per year. So how can the restaurant ensure that best people face customers on the busiest days?
What Objective Logistics has done is to track performance of restaurant waiters (thanks to POS system!) and to rank-order them according to a proprietary formula which takes into account waiters’ recent performance. The best waiters then obtain first choices of times to work and, as a result, better tips. The system puts servers into direct market-based competition with each other which is judged in a non-subjective and fair way. Best workers get more work and make more money. If you thought that market competition is the domain of athletes and movie starts then think again…