New Research Says Teamwork Increases Profit in the Service Industry

INFORMS journal Management Science New Study Key Takeaways:

• To maximize restaurant sales, managers should mix waiters with different ability levels during the same shift.
• Mixing waiters of various ability levels in the same shift is associated with 2.5% improved financial performance.

CATONSVILLE, MD, August 22, 2019 – New research shows that as the service sector continues to struggle with how to manage and minimize low labor productivity that hinders profits, the key may be in one word -- “teamwork” -- according to a new study in the INFORMS journal Management Science after studying firms in the restaurant industry. Researchers believe, however, that the findings can be generalized among the service sector to include hotel and retail services.

At a high level, the research found that effective teams tend to promote knowledge sharing, repeated collaborations and creativity.

The study, conducted by Fangyun Tan of Southern Methodist University and Serguei Netessine of the University of Pennsylvania, looks at data from three locations of a full-service casual restaurant chain. They observed 226,000 checks between January 2011 and June 2012.

“We found that by pairing strong workers with less strong workers on the same teams, the overall strength of the team improves as those less strong workers are taught, mentored and inspired by their stronger counterparts,” said Tan, a professor in the Cox Business School at SMU. “This implies that to maximize sales, managers should create teams that combine staff members of different ability levels for the same shift. Our research tells us that doing this may increase total sales by nearly 2.5 percent at no extra cost.”

Tan and Netessine find this improvement is due to peer effects and the spillovers between coworkers’ abilities and the performance of others.

The study suggests not only should managers mix workers with varying ability levels during the same shift, but also place high-ability workers at a more visible position to maximize positive spillovers on their colleagues and reconsider their compensation to reward their positive spillovers.

Link to full study.

About INFORMS and Management Science

Management Science is a premier peer-reviewed scholarly journal focused on research using quantitative approaches to study all aspects of management in companies and organizations. It is published by INFORMS, the leading international association for operations research and analytics professionals. More information is available at www.informs.org or @informs.

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