Customer-centric Compensation Plans: Linking Compensation Plans of Employees in Indian Restaurants with Expectations of Customers

Abstract

The paper attempts at establishing alignment between compensation plans for employees in restaurants with customer preferences obtained by means of an exploratory research. The findings of the research indicate that food & beverage, cleanliness & comfort, assurance, personal attention, and special feeling are the dominant factors shaping customer expectations in India. Two different categories of customers were identified based on whether they prioritized dining experience or the tangibles associated with service. Ranking of priorities was done on the basis of the mean scores obtained in each of the factors mentioned above. For customers prioritizing tangibles, Special Feeling obtained the lowest score and featured at the bottom of the list. Food & Beverage, on the other hand, remained the top priority for customers across both categories. For the purpose of designing pay-for-performance plans, restaurants were categorized on the basis of their target customer segment. The percentage of variable pay was decided on two factors, (i) degree of control enjoyed by the employee and (ii) strategic importance of the particular function. The kitchen staffs were assumed to have suitable control over the Food & Beverage factor and the front-house staffs over the factors Assurance, Personal Attention and Special Feeling. To ascertain the strategic importance of a particular factor, the score obtained by it as well as its rank in the priority list were taken into consideration. Following this, suitable parameters for assessing the performance of employees were identified and their relevance discussed in some detail.