Received: 27 February 2017 Revised: 11 January 2018 Accepted: 12 January 2018 DOI: 10.1111/peps.12261 ORIGINAL ARTICLE A meta-analytic review of tipping compensation practices: An agency theory perspective George C. Banks 1 Haley M. Woznyj 2 Sven Kepes 3 John H. Batchelor 4 Michael A. McDaniel 3 1 University of North Carolina at Charlotte 2 Longwood University 3 Virginia Commonwealth University 4 University of West Florida Correspondence George C. Banks, Belk College of Business, Uni- versity of North Carolina at Charlotte, 9201 University City Blvd., Charlotte, NC 28223. Email: gcbanks@gmail.com Abstract Tipping represents a form of compensation valued at over $50 billion a year in the United States alone. Tipping can be used as an incentive mechanism to reduce a principal–agent problem. An agency problem occurs when the interests of a principal and agent are misaligned, and it is challenging for the principal to monitor or control the activ- ities of the agent. However, past research has been limited in the investigation of the extent to which tipping is effective at addressing this problem. Following an examination of 74 independent studies with 12,271 individuals, meta-analytic results indicate that there is a small, positive relation between service quality and percentage of a bill tipped (    = .15 without outliers). Yet, in support of the idea behind tipping, relative weights analyses illustrate that service quality was a stronger predictor of percentage of the bill tipped than food quality, frequency of patronage, and dining party size. Evidence also suggests that racial minority servers tend to be tipped less than White servers (Cohen's d = .17), and women tend to be tipped more than men (Cohen's d = .15). Still, given the magnitude of the effect, one might question if tipping is an effective compensation practice to reduce the principal–agent problem. We discuss theoretical and practical implications for future research. Determining how to structure compensation is a critical strategic decision for organizations. Compensation is impor- tant to employee attitudes and behaviors, to the success of organizational functioning, and ultimately, to a firm's sus- tained competitive advantage (Gupta & Shaw, 2014). From the perspective of both organizations and employees, pay- for-performance tends to be the most desired general approach for compensating employees (Heneman & Werner, 2005; Kepes, Delery, & Gupta, 2009). Tipping, a particular approach to pay for performance, is especially popular; in fact, it is one of the most popular types of compensation practices in the United States and around the world (Lynn, 2015a, 2015b; Lynn, Zinkhan, & Harris, 1993). Under a tipping system, customers voluntarily give some amount of money, called tips or gratuities, above and beyond the contracted price of a service after that service has been ren- dered (Lynn & McCall, 2000). Recent estimates suggest that in the U.S. restaurant industry alone, close to $47 billion Personnel Psychology. 2018;71:457–478. wileyonlinelibrary.com/journal/peps c  2018 Wiley Periodicals, Inc. 457