MHR 305

Gautam Pulla, Zhongwei Liu, Jordan SimonsonMHR 305 Case Study #2

Harrah’s Entertainment, Inc.: Rewarding our People

1. Gainsharing Program Strengths

The gainsharing program created by Loveman had various strengths. Due to the nature of the

gainsharing program, each location’s employees felt like they had control over the rise and fall of

customer service. For this reason they felt empowered to perform better customer service. No matter

whether the company was doing bad, the employees knew they would get these incentives as long as

they performed well. Once these employees reached a goal, each person was personally given as much

as $200 to further incentivise their efforts.

Managers were encouraged to create a competitive attitude towards other departments and

locations across the nation. For instance, Susie Lewis, the director of cashiering at Rio’s, pushed her

cashiers to be competitive with the valets. Once they became the highest rated department in service

she continued to tell them to be number one and that they “were best on the property.” The gainsharing

system instilled such a competitive nature in herself that when their goals were not met in previous

periods, she personally bought all of the cashiers tshirts to keep their spirits up.

Before the gainsharing program, many employees were focused on the old way they did

business and were not interested in helping others and the organization succeed. With the introduction

of the gainsharing process, employees were looking forward instead of backwards at tradition. This

created higher levels of cooperation among departments and properties. By creating a cooperative

atmosphere, it helped to reduce turnover in the organization. People shared knowledge and made

suggestions, which allowed people to feel more involved in the company. Jenkins, general manager of

Harrah’s Las Vegas, noted how important communication was to reducing turnover. This increased

communication and new goals were what the company needed to move into the future and stop looking

into the past.

2. Gainsharing Program Weaknesses

Even though there was a great sense of competition among the departments and locations, many

employees felt like it took a long time for them to reach their goals and get a bonus. This would push

many people to become reluctant to improve if they did not feel the rewards came at a soon enough

time after service was improved. Even though a good portion of people would be motivated by money,

the amount of motivation decreases the longer it takes to receive a bonus. Therefore, this weakness

makes the money used less worthwhile and is something that should be considered when weighing out

the pros and cons of putting money into the gainsharing program.

Competition is not always the best thing for an organization. The gainsharing system allowed

many departments in a casino to compete against each other. Susie Lewis pushed her cashiers to

compete against the valets in customer service. This was great for her cashiers to improve, however this

reduced the amount of teamwork among departments. Her cashiers were less likely to help the valets

improve on their customer service if they are in a heated competition against each other. This reduction

in teamwork would hurt the overall, arching goals of Harrah’s to improve customer service in the entire

organization.

If the employees do not feel the $200 is worth their time to increase customer service, they will

not be motivated to improve. There is a lax link between the outcome and reward, leading to low

valence. Vice President David Honeymeyer had a hard time motivating his food and beverage

employees by the $200. Some employees may benefit from other forms of motivation more than cash.

This current gainsharing program does not account for the variability of people with unique and special

personalities.

3. Vertical Alignment

An example of how Harrah’s has aligned the rewards aspect of HR policy with the company

strategy is through the gainsharing program. The new strategy was focused on fostering customer loyalty

through exceptional customer service. As Loveman said, “We introduced gainsharing to further our

goal of customer service” (text, page 6). Before, employees would avoid customers alltogether

because there was a chance of being fired if caught taking a bribe on a camera. Although wrongful

termination would be rare, such a threat gave the message that employees would be better off avoiding

contact with customers. Through the gainsharing program, employees were rewarded for meeting

quarterly customer satisfaction goals. This caused a dramatic improvement in customer service since

employees now made proactive efforts to approach customers instead of choosing to avoid them all

together. The program also made positive changes at the management level too. Before, bonuses to

managers used to be solely based on improvements in operating income. Now, 25% of management

bonuses were based on customer satisfaction. As a result, managers went from barely thinking about

customer service to regarding it as a fundamental portion of management goals. By the end of the first

year, the rewards given through the program also helped reduce turnover from 70% to 50%, a great

accomplishment for the company.

An example of how Harrah’s has aligned the people aspect of HR policy with the company

strategy is through the hiring and socializing process. Once again, the strategy of Harrah’s Entertainment

was to achieve a degree of customer service that beat out competitors. From the beginning, the problem

didn’t have too much to do with finding talented employees, but more to do with retaining them. As

Loveman told Winn, “I can’t deliver great customer service unless I have a stable workforce” (text,

page 4). Through the new HR policies Winn implemented into the hiring and socializing process, many

more of the right people chose to stay with the organization. Winn’s set sequence of interactions only

accounted for the first three months on the job. However, the strength of the setup lied in the fact that it

emphasized increased communication between the company’s personnel and the new employees in the

delicate time period of initial employment. By having those HR and manager interviews, along with

additional meetings at intervals such as 30 and 45 days, the employees felt more valuable and included

in the company. The increased communication in those early months of employment naturally made the

employees feels more tied to the organization and more reluctant to leave. The numbers demonstrated

this when Winn brought down average turnover from 45% to 34% within the first year. This

demonstrates vertical alignment because the HR policies implemented to bring about this change helped

reduce turnover, which promoted the company’s goals of improved customer service.

An example of how Harrah’s has aligned the roles aspect of HR policy with the company

strategy is through the gainsharing program. As stated before, it changed management bonuses to have

25% dependent on customer service scores. As a result, managers who previously saw little need to

address customer service, now thought of it as a primary objective. Managers became more involved

with the workforce. Ward Shaw of Harrah’s St. Louis chose to hand out the employee performance

payouts personally at a barbeque. Also, Susie Lewis motivated her cashiers to stay optimistic during a

lost bonus year by buying tshirts for the department. By having performance payouts for basic level

employees, and having executive bonuses be dependent on improved customer service, the amount of

communication and cooperation between management and basic level employees was enhanced.

Therefore, through the HR implemented gainsharing program, employees from all levels came together

more effectively to promote the company goal of excellent customer service.

4. Two Main Cultural Values and Alignment with Satre’s Strategic Goals

The culture at Harrah’s in the 1990s was low in aggressiveness. Employees were not competitive and

the company formed institutional priorities of long tenure and the happiness of employees seemed to be

everything that the company cared about. As a result, employees were used to how things had always

been done in the past and were unwilling to look forward. This was misaligned with Satre’s strategic

goal of wanting Harrah’s to be distinguished from its competitors through excellent customer service.

Without competition among employees and incentives from the company, employees have little

motivation to try to do their best to achieve the company’s goal. Also, with these longterm employees,

they are unlikely to get motivated to accept new challenges such as improving their customer service.

Another important cultural value shared by employees in Harrah’s was to follow the rules. For

example, the head of human resources only cared about designing senior executive packages and team

management and didn’t pay attention to the core operation subjects of the casino industry, such as

gaming and hotel operation. This value contradicted with Satre’s strategic goal of wanting Harrah’s to

be different than its competitors by changing from a productbased company to a marketingbased

company. Since the top executives were rule followers, they didn’t represent leadership and were

resistant to change. This was harmful to Harrah’s given its need for change. Also, the top management

strayed away from addressing what the casino industry needed, and this caused obstacles in Harrah’s

transition to a marketingbased company since they needed to gather valuable information about the

market in order to come up with the most appropriate marketing strategies.

5. HR Initiatives Changing Culture

The gainsharing program was a large change for the company that really helped to change the

culture in the company. Before this program, many employees were stuck in past management styles.

This gainsharing program created incentives for the departments and locations to look forward to. The

biggest change in culture that came from the gainsharing program was the increased competitiveness.

Employees were pushing themselves to be better than other departments and other locations in terms of

customer services. This competitive nature also fostered a teamoriented culture where community and

teamwork among the members of a department were emphasized. These departments would expect

the best out of its team members. For example, Susie Lewis mentioned how her cashiers were

working as a unit to beat the valets in customer service. In order to do this they had to work as a team

and help each other out.

Loveman and Winn also set out to reduce turnover. They did this by investing in new employees

and putting formal measures in place that hired qualified candidates and then kept them in the

organization. Potential hires were subject to standardized tests, that made applying fair across the

board. Only the best employees were hired. Once in the organization, Winn put in place several

measures to “velcro” these new hires to the company. Winn felt the best way to reduce turnover was to

find the best people and then evolving their roles. By finding people that had “an innate desire to

achieve and learn and grow,” Winn was using these great employees and low turnover to change the

culture of the organization to become one of forward thinkers (text, page 5). These new employees

brought new ideas and attitudes to the company. Tom Jenkins was an example of a manager that used

these tactics to reduce turnover and invest in his new employees.

6. Recommendations

Winn should suggest some minor changes to the gainsharing and hiring program. The

gainsharing program has been extremely successful in encouraging employees to give good customer

service. In this case study, however, there were several instances where people worked harder but

narrowly missed bonus thresholds. If this happened for extended periods of time, employees may

become less incentivized by the potential bonus. A fund should be put into place for managers to use to

personally incentivize their department. Susie Lewis bought shirts out of her own checkbook and gave

them to her cashiers. While this is great that we have such great manager loyalty, we should not expect

this from all of our managers. Financial backing for these special ideas could be the boost some of

these managers need to incentivize their employees. The reward thresholds may also need some

finetuning.

There is also the question of what to do with people or departments that are outperforming the

current bonus system. This refers to the rare occasions where departments have close to 100 percent

customer satisfaction and there is no room for improvement. HR should begin looking at promoting

these employees. These employees would make great managers because they know the customer best

and are established in giving good customer service. Also, using employee training will help ensure

these employees are ready to become managers. This would also help with further reducing turnover.

These employees know what Harrah’s is all about and will have proper expectations.

Winn also needs to make sure that the competition among employees stay at the right level so

that it doesn’t get to the point where employees feel overwhelmed and get burned out by it. When

competition gets too intense, it may trigger unethical behaviors among employees which can be harmful

to the company’s public image and customer loyalty. Also, it’s important to have clear cutoffs on the

reward criteria to ensure fairness. Moreover, Winn can change the rewarding program from only

rewarding the best team to have everybody rewarded in a certain scale based on his or her

improvement. This not only improves instrumentality among employees, but also complies with equity

theory. When employees see their inputs and outcomes as relatively fair to other people’s inputs and

outcomes, they are more likely to stay in the company which can in turn lower the turnover.

Additionally, Winn may consider to reward employees with other things such as training, personal

development and promotion rather than merely money. This is because some employees may not get as

motivated by money as other people. Also, the same amount of money (~$200) may not be as tempting

after a while as it first started. Therefore, in order to improve valence, Winn can either raise the reward

pay or offer those three options mentioned earlier.

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MHR 305