Case Study - Harrah’s Entertainment, Inc.

: Rewarding Our People

Section I - Case Overview

Harrah’s Entertainment, a fortune 500 and one of the largest casino entertainment companies
had decided to move away from being a product based to more of a strategic marketing
oriented company whereby tailoring its products and services based on customer data and
creating a customer focused reward program. At the heart of Harrah’s reward program are its
employees who would ultimately carry it out in the field. Therefore, to motivate and get
employees energized, Harrah’s had instituted an incentive pay plan in order to reward
employees in all its properties for improving overall customer service metrics. Harrah’s goals
behind the said incentive plan were to implant a competitive mindset in its employees as well
as to show that the employees are at the core of the company’s strategic customer focus plan.
Through Harrah’s strategic customer reward program, the company gained the market share;
however, it is not quite at the expected level. As such, employees in many properties did not
get the incentive payout regardless of their tireless effort. This resulted in employees feeling
like their hard work was not recognized and that the management kept raising the bar on
customer service goals. Harrah’s head of Human Resources was concerned that employees
could ultimately become discouraged which would result in a failure of the company’s new
strategic plan on improving customer service.

Section II a - Strengths and weaknesses of Harrah’s gain-sharing program

Harrah’s gain-sharing program had successfully instituted a competitive mindset in its

employees and increased customer service level. Through the program employees had stated
to understand that they had a stake in improving the overall customer service. The gain-sharing
program also gave a sense to employees that the company was ready reward employees for
their hard work. In addition, managers’ bonus payouts were based on multiple factors such as
gain in market share, improvement in customer satisfaction, and increase in company’s
operating income. This allowed the company to hold mangers more accountable for managing
their teams effectively and successfully contributing towards Harrah’s customer reward
program.

Despite its much strength, the gain-sharing program was not as effective in gaining the
expected lever of customer satisfactions. Harrah’s management kept raising the bar on their
expectations on customer service improvements whereby implicitly indicating that employees
would not be able to meet the targeted results. The caused a breach in the psychological
contract as many employees did not receive the incentive payout, as promised by the company,
despite working tirelessly and fulfilling their end of the bargain. Another weakness of the gain-
sharing program was that it was not tied to the company’s operating income. Any such
strategic incentive program should be tied to company’s bottom line. In other words, if the
company is not earning more revenue through program such as gain-sharing, which requires
investment in incentive plan for employees, it ultimately invalidates the merit of such program.
As such, Harrah’s increase in overall customer services through the gain-sharing program did
not result in increased bottom line for the company.

Section II b - Advise for Merilyn Winn

Ms. Winn should reevaluate the incentive program she had designed to motivate employees to
partake in company’s strategic plan on focusing on customer satisfaction. First, the incentive
plan should be tied to the company’s bottom line. In other words, Harrah’s should, on a regular
basis, measure the effectiveness of the gain-sharing program by comparing it with its operating
income. If the operating income has an upward shift, the gain-sharing can be deemed as
monetarily effective as the company is getting a return on its investment. Second, the gain-
sharing program should have a set target on customer satisfaction. This would allow
employees to feel a sense of accomplishment once they hit the defined customer service target
and thus would strengthen the psychological contract. Third, Harrah’s should solicit feedback
from employees and include them in the overall evaluation of the gain-sharing program’s
effectiveness. Fourth, Ms. Winn should plan on developing a program that is fully employee
focused in order to keep them motivated. For example, employees who hit the gain-sharing
target would get the bonus and in addition, would qualify to enter a draw for an all expenses
paid vacation. The employee focused plan also could include components such as, any division
that positively contributes to the company’s bottom line either through gain-sharing or other
medium would get additional budget to reward their employees monetarily. In addition,
Harrah’s could utilize various organizational currencies such as employee recognition,
advancements, and visibility in as motivational factors. As part of the employee focused plan,
Harrah’s should allow employees’ input how to be more customer focused, efficient, cost
conscious, and effective organization. The upper management should then leverage these
input to devise long-term strategies to further the organization.

Section II c - Alignment of the HR practices to the company’s strategy

Since Harrah’s new operating strategy calls for employees’ commitment and participation,
lowering turnover and increasing motivation were key factors. Ms. Winn’s instituted a plan
that would focus on recruiting most qualified people for a given job, anchor the new hires to
stay with the company by allowing them to move to a different role in the event they are
unhappy with their current roles, enhanced interaction with HR and functional managers to
verify and validate commitment. In addition, a gain-sharing program was introduced to induce
employees to focus on improving customer satisfaction in return for monitory reward.
Employees would receive an incentive payout of up to $200, regardless of Harrah’s operating
income, if they were able to satisfy quarterly customer satisfaction target.
Section III a - What did you learn from this case

The Harrah’s case study has taught me that at the heart of any company’s successful strategies,
employees are always the key. End of the day, it is the employees who carry out the plans
crafted by upper management. Therefore, in order for employees to help corporations to be
successful in their ventures, organizations need to institute a strong psychological contract with
employees. Without any measurable reciprocity, the psychological contact can be broken. It is
merely not enough to incentivize employees to partake in organizational strategies but
additional organizational currencies needed to be traded such as recognition, career
advancement, visibility, and importance in exchange for commitment and loyalty. In addition,
all corporate strategic plans must have a set target and need to be evaluated and measured
from the perspective of employees as well as bottom line. Companies that make decision
without blinders and incorporate a check and balance mechanism in their strategies become
successful and gain the largest market share.

Section III b - Use of this information in my current or future job

In order for me to motivate, encourage, and solicit buy-in from my employees on any new
initiatives, I would keep them at the center of my decision making. I would remove blinders on
my decision making by self critiquing the strategy and looking it from multiple perspective. In
addition, I would develop a feedback loop mechanism whereby employees ultimately carry out
the plan would have input. I would also implement a reward system that would recognize
employees contribution based on the achieved target.