Gautam Pulla, Zhongwei Liu, Jordan Simonson MHR 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.