This is the first of several articles in which I explore the social-psychology of motivation in organisations. In this article I present a case study of a large hotel group that had introduced a financial incentive scheme in its hotel restaurants to promote behaviour that ought to contribute to increased performance.

The case is interesting as, perversely, after the company introduced the scheme, performance at certain restaurants that was previously good, started to fluctuate rather than to rise to the theoretical maximum determined by the hotel’s capacity. This was the opposite of what the organisation expected.

The organisation contracted consultants to investigate the performance problem. The consultants discovered that the incentive scheme was an important influence in a systemic process that had the potential to lower the performance of the hotels. Given certain behaviours, the way the scheme operated could negatively affect performance.

In this case I explain the consultants’ central finding to try to stimulate some discussion about the social-psychological effect of incentive schemes on employee motivation. Overall, I emphasise the need for executives to understand the social-psychological processes involved when designing incentive schemes or introducing any initiatives to improve people’s motivation to work.

Often, counter-intuitively, what appears to be the sensible and logical thing to do, can have no effect or a negative effect. It is important for managers to understand the tendencies for people to behave in certain ways when they work with others in groups, before starting any ‘social re-engineering’ project in an organisation.

The company
The organisation is a large restaurant and hotel group in the United Kingdom. The group has several restaurant and hotel brands targeting different demographic groups. One of these brands comprises several hundred small hotels with a bar and restaurant and up to ten bedrooms in a variety of locations on popular travel routes and in towns and villages across the country.

The hotels are conveniently situated, aimed at people travelling for pleasure or business, and to attract trade from local residents in the surrounding area. The company monitored the service quality at the hotels against a formula that they deemed was most likely to maximise performance. This formula included financial incentives for certain managers.

This case focuses on one of these hotels that I call The Oak Tree. This is a fictional name. I have also changed other details to avoid disclosing the identity of the hotel, employees or the organisation.

How the hotel and restaurants work
Each hotel employs around thirty-five people. Employees comprise some hospitality professionals usually in management positions, or undergoing training for a career in hospitality.

A large number of the staff are young workers, aged from eighteen years to late twenties, frequently students working during college holidays or while they look for a job that would become a career, or people who could not find any other type of work.

Because the hotels employ so many young people for relatively short periods, they have a considerable employee turnover rate. The staff are organised into small interdependent groups: housekeeping, reception staff, bar staff, servers, and kitchen staff.

The non-managerial staff are poorly paid. Those working in the bar and restaurant depend on making extra money from tips that customers pay them for good service.

The hotel guests use the bar and restaurant in the hotel. Local residents also use the bar and restaurant to socialise or to have lunch or dinner.

During the week, the restaurant aims to attract casual diners for dinner on any night of the week, who would decide on impulse to eat out, rather than prepare a meal at home. In this sense, the restaurants are competing with home-cooking as well as competing with similar hotel and restaurant chains. The restaurant meal therefore is a replacement home-prepared meal, rather than a ‘special occasion’ or formal meal.

Quality and performance
The restaurants are certainly not in the fast food market, nor are they fine-dining venues. Rather, the restaurants have a reputation for hearty food prepared to a good standard and a casual, friendly atmosphere. At weekends the restaurants have a busy trade in families and groups of friends, who have generally booked the restaurant a couple of days in advance, rather than making an impulse decision.

Because the restaurants are competing against home cooking, the meals are reasonably priced to trigger an impulse decision to dine out. However, to make it worthwhile to eat in the restaurant, diners expect the food, bar and table service to meet their expectations. If service levels are questionable, and, or, the food disappoints, people are more likely to stay at home to eat or go to a competitor.

Price, food and service quality are therefore crucial elements that influence an impromptu decision to eat out. People travelling for business or pleasure also make impulse decisions to stay in the hotels during their journey, or they research them in advance of travelling and make a booking for a room and a table in the restaurant. These categories of customer are also very sensitive to quality service and pricing.

The group develops meal specifications in its research and development department. The meals are very carefully costed to ensure they can be sold at a competitive price but make a targeted profit. Margins are small.

The company also specifies how servers should present the meals to the customers and maintain the right ambiance in the restaurant, putting lighted candles on tables, choosing the right background music, appropriate lighting and so on.

An important part of the servers’ role is to sell the diner extras, such as supplementary bowls of vegetables, a desert course, more wine and so on. The servers therefore have a sales role as well as responsibility to serve the meal. They depend on the kitchen staff to prepare the meals according to specification and aligned with the menu, and on bar staff to provide them with wine and other drinks in a timely manner to please the diner.

All staff must be welcoming, cheerful, sociable, enthusiastic, and follow certain protocols including good housekeeping, how to interact with guests, and quality of food, drink, environment and service. If all employees adhere to the company’s formula for success, in principle the guests will be satisfied and will return, a virtuous cycle.

The kitchen manager incentive scheme
To promote performance in the restaurant, the company introduced a financial incentive scheme to encourage the kitchen manager(s) to ensure each meal meets quality standards and comprises the right portion size of the right food elements. The kitchen managers are paid a bonus based upon the number of guests served and restaurant profitability.

The idea is that if the food is up to specification, the diner will be happy, assuming the serving staff serve the meal appropriately. The serving staff, and bar staff, receive a bonus also – the tips that the customer leaves when they have had a good experience.

The kitchen staff, the servers and the bar staff are therefore financially interdependent and in theory should work well together.

Hard graft
Although the consultants looked at all aspects of the hotel, the case focuses on the quality of food and service in the restaurant.

Here is a sample of a group discussion the consultants facilitated with restaurant staff to understand their experience of working in the restaurant. My comments in parentheses.

[Regarding the kitchen manager]

“He just cares about his bonus.” “he’s perfect for this company.”

“Yeah, with him it’s just money, money, money.” [this is a reference to the employees’ apparent distaste for the company’s aggressive approach to profitability relative to how hard they have to work for a very small wage.]

“He really is the most horrible person to work for.”

That’s why I won’t do it ‐ why should I work my xxxxx off to get that guy a bonus.”

“Yeah, they need to sort that, maybe if everyone got something but the manager just got a little bit more for coordinating it.”

“Where I was before, alright it wasn’t a big company, but what I did in that kitchen I loved, and then I’ve come here to work with a guy that’d like kick me in the head. And I was on better pay.”

“Yesterday how busy was it ‐ we worked our xxxxx off and what did we get for it ‐ nothing. No benefits or nothing.”

“We’re grafting and we get nothing for it”

“Why should I push myself one-hundred percent?”

“Yeah, and you get nothing for it but a pat on the back.”

“Have you seen the…. this restaurant made a million pounds for this company, and we can’t even get twenty-five percent discount on our food.”

“We don’t get anything ‐ you are expected to work bank holidays and everything for no real benefit.”

“I’ve worked for other companies, and you just get given something small like £15 gift vouchers yet here you get nothing, and I think we’ve done really well this year.”

“They’re not giving you a pick‐me‐up.”

“We used to get £25 every damn holiday ‐ they used to do it every bank holiday but they stopped”

“You know, they should recognise that everyone outside is having a nice time and I’m stuck in here with work, so it was a thank you for me. But now we don’t get that anymore.”

[The staff clearly felt that they were being treated unjustly – that they needed to receive an adequate reward for what they saw as extremely hard ‘graft’.]

[Regarding meal quality]

“For him to have his bonus me, Paul and Ellie have to have everything perfect in that kitchen. But you can’t send out every dish at the perfect time it’s impossible.”

“Yeah, but he sends out portions half the normal size.”

“And with the king prawns you’re supposed to serve eight and he sends out five and that is embarrassing.”

“He [the kitchen manager] can’t even get a basic dish like sausage and mash’s supposed to go out with bacon and it even says so on the menu and he puts out bacon gravy instead.”

“You can’t win cos the kitchen shouts at you saying no that’s a portion of mash that’s all they’re getting and then you go back to the customer, and they shout at you cos they want more, and you won’t give it to them. It’s stupid to scrimp on the portions to try and make more money and we’re not even making enough money to give him a bonus.”

“When he isn’t there I serve bigger portions cos I just find it embarrassing.”

“Yeah, when that happens the customers are happier and we get better tips and they come again.”

Paradoxically, the staff had found a partial solution to the problem themselves; give the diners bigger portions. But this increased meal costs, reducing the kitchen manager’s bonus, encouraging him to continue to serve inadequate portions. This situation partially explains the puzzling fluctuations in performance in some of the restaurants.

Diners tend to forgive restaurants when they have a bad experience on one or two occasions, putting it down to random error such as someone having a bad day. They would not necessarily therefore abandon the restaurant at once.

But because the impulse decision to dine out is so sensitive to the diner’s prior experience of meal and service quality, or what others who had dined at the restaurant told them, in the medium term they would stop dining out in that restaurant.

In due course, the overall revenue for the hotel, restaurant and bar would fall, and the establishment could become loss-making. Employees would become even more demoralised and leave. Until the hotel hired replacements and trained them, service quality would be further compromised.

Concluding remarks

• The consultants have used this case in workshops with executive teams in other organisations. These are some of the questions that they posed that have provoked useful discussion:
• If you were an executive in this company responsible for hotel performance, what would you do to address this problem?
• Is the behaviour of the kitchen manager(s) a problem due to poor selection of managers in certain hotels, or is it the result of having this sort of bonus scheme?
• Is there some innate human tendency that tempts people to behave [like the kitchen manager] in certain contexts?
• Is there some interpersonal and/or intergroup dynamic that is prompting this outcome?
• A couple of other observations. Although the staff were clearly demoralised about their own pay and conditions, and the behaviour of the kitchen manager, they were effusive in their praise for the hotel manager. He was very pleasant, competent and did whatever he could to keep his employees happy and motivated. In the group discussion one employee said, “we only do it for Paul” – this prompted a chorus of agreement from other group members, “that’s right, we only do it for Paul”.
• Another incongruity is the nature and competence of the executive team. The consultants spent a lot of time working with the executive team individually and as a group. They found the team to be very competent and humanistic in their approach to management.
• The consultants observed the executives interacting with the hotel staff on their regular visits to the hotels. Their attitude was delightful. Furthermore, the company, which is listed, is profitable.
• The labour market for hotel staff is not competitive. There is an unending supply of casual workers, students and other periodic workers ready to take up work in hotels and restaurants. Does this throw any light on the problems set out in this case?

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