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The case study of Harrah’s Entertainment, Inc.: Rewarding our People follows the shift by Harrah’s Entertainment from a company driven by service to a company driven by customer satisfaction though investment in employees and bonus reward systems. According to the research conducted by Delong and Vijayaraghavan (2003), Harrah’s Entertainment, Inc. has pay-for-performance program focusing on bolstering its incentive plan that had reached its effectiveness in 2001. Gary Loveman, the Harrah’s Entertainment, Inc.’s COO and president, had given Marilyn Wynn, the head of Human Resource Department, the responsibility of tabling before him the ideas on how they could put in place an incentive plan or other freshly created programs to inspire their staff.
The CEO’s main concern is that the cost of the existing incentive plan, valued at $16 million annually, results not in an increase in operational revenues raising the question of whether a return on investment should be tied to the program. Additionally, this existing program appears to have lost its effectiveness of motivating a large portion of Harrah’s Entertainment’s employees as most of them were feeling disgruntled at their inability to meet the set targets in order to obtain the specified rewards. This paper analyses the concerns addressed in the case study with an attempt to provide Marilyn Winn with appropriate recommendations and ideas to be directed later to the CEO and president.
Harrah’s Entertainment, Inc. Pay and Performance Program Analysis
Information Gathering on the Pay and Performance System
According to Milkovich, Newman, and Gerhart (2011), the effective merit-pay systems must have credible, comprehensive measurements for performance. Without such systems, it is impossible to relate pay to performance. It also becomes hard to motivate employees to work hard and realize increased operational revenues effectively. There is a close relationship between pay, incentives, and service delivery. According to Aamodt (2016), Dessler, and Phillips (2012), when employees are motivated through incentives, rewards, and compensation systems, they build stronger relationship with customers resulting in customer commitments. Reece and Reece (2007) views incentives as useful in improving quality, reducing accidents, increasing sales, improving attendance, and speeding up production within firms as they are always focused on improving behaviors that will cut expenses and increase customer satisfaction. The subject of employee’s motivation towards realizing an increase in operational revenue is a matter of concern in Harrah’s Entertainment, Inc., given that the existing system has not resulted in any notable increase in revenues.
According to Delong and Vijayaraghavan (2003), Gary Loveman joined Harrah’s Entertainment, Inc. as a COO and made a shift towards focusing on customer services. For the improvement to be realized, Harrah’s Entertainment, Inc. had to help its employees, expand their skills together with embracing the anticipated change. As such, Gary Lovemen employed Marilynn Winn to rule the Human Resources Department and understand how the entertainment giant engages in staff development. Upon her promotion to the HR, Winn immediately came up with a three-pronged human resource development plan to aid Harrah’s human resource capital. This plan focused on: compensation and benefits; property, products, and services which include training together with assessment; and management search and leadership development (Delong & Vijayaraghavan, 2003).
Winn also designed and implemented a brand-new reward system (bonus payout program) that motivates employees and, in turn, improves the establishment’s customer satisfaction success. However, after an initial good fortune, recent downturn in economic conditions have led to this program failing, and questions have arisen as whether it is still the most effective way to make Harrah’s a service- and customer-driven firm. Winn is faced with the decision to make concerning the effectiveness of this existing bonus payout program at motivating employees given the challenging working casino environment where customers often lose their money. The casino employees experience difficulties and unique challenges in getting engaged in customer service as the casino industry is highly regulated. The total control of the casino industry means that employees’ interaction with customers is also regulated. It forces employees to choose less contact with customers (Delong & Vijayaraghavan, 2003).
To get the employees more engaged with customers, a paradigm shift is needed, which Winn instituted through her employee reward system. This program involved rewarding employees for improved percentages in customer service scores within the property and within the departments gathered through the Targeted Player Satisfaction Survey. Moreover, Loveman ensured that every employee understood that, if they improved their services irrespective of the financial performance, they will still get rewarded (Delong & Vijayaraghavan, 2003). In line with this strategy, Harrah’s Entertainment has paid out $16 million worth of bonuses to non-management staff through the gain sharing program by mid 2001 (Delong & Vijayaraghavan, 2003). This gain sharing program is focused on improving customer service at all levels of the casino’s within Harrah’s Entertainment Enterprise. The incentive plan under the program concentrated on the interfaces and envelopment of employees in order to increase productivity through undeviating interaction with consumers.
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This incentive plan was also intended to give workers the feeling that they were an imperative component of Harrah’s Entertainment, Inc. Additionally, the reaction to it was positive, more so when one considers the program’s history and the reason for it being formulated in the first place. Phil Satre, being the Harrah’s Entertainment, Inc.’s chairman for 12 years, decided to put in place far-reaching changes to the Harrah’s Entertainment, Inc.’s organization that would ultimately lead to Winn’s gain sharing program. After being hired in the 1970’s by Bill Harrah who founded it, Satre began to observe that Harrah’s Enterprise had been suffering the dangers of fearing change. He stated that the company was ailing from “abundance of a good thing” (Delong & Vijayaraghavan, 2003). According to Delong and Vijayaraghavan (2003), Bill Harrah started and operated his gaming houses with the “noble ole boy” approach of taking care of the personnel by keeping it hired. The longer they stay within the business, the better they would perform in terms of the product-based (betting and showbiz) system.
Phil Satre, however, was more forward thinking than the founder Bill Harrah, and his strategic plan envisioned shifting Harrah’s from a product-based business to a market-based firm. Satre had the belief that Harrah’s Enterprise could be singled out from its competitors by becoming a market-based firm. This belief entailed increasing Harrah’s in-store revenues through changing the customers’ mindset to making them believe that Harrah’s was their home outside their real homes, thus selecting Harrah’s over their rivals. This approach proved to be truethful immediately after the September 11, 2001 attacks, a period which saw the entertainment industry experience in a drastic reduction in revenues and customers. As other casinos experienced reductions, Harrah’s maintained its productivity. Still in line with shifting Harrah’s to market-based business, Satre provided Gary Loveman with mold promotion strategies based on the instituting of the Total Rewards Program, which is a client reward plan that gathers information on consumer entertainment behaviors (Delong & Vijayaraghavan, 2003). These behaviors form the foundation for the market stratagems.
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It is worth noting that the market-based strategy of focusing on customers placed pressure on customer service practices and employees within the entertainment and gaming enterprise. As such, Winn zeroed in on the significance of creating an incentive plan that dealt with customer service in order to increase client contentment while, at the same time, giving employees the capacity to adjust the measure of the business and the habitué who felt they were at their households outside of their real homes. By 2001, Harrah’s gaming houses was incurring payments of $16 million per annum for their incentive program. However, new challenges resulted from this pay-out program. Winn and Loveman had to figure out how to continue growth in the customer service program, given that the continuous improvement aspect of the program is the “low-hanging fruits had been picked”, and increased service improvement principles were becoming even more of a harder work for employees (Delong & Vijayaraghavan, 2003).
Moreover, it is often difficult to keep employees absorbed and driven on customer service when the mesa of service has been attained. The employees continue to work hard at this level, but they no longer see or realize the bonus rewards. Even though, the incentive program at Harrah’s appeared to be a solid and effective means through its success in increasing customer service tremendously, peeling back the onion exposes the cracks resulting in the $16 million gain sharing package. In addressing these emerging concerns, Winn’s goals entailed, first of all, coming up with a customer service metric which is now taken in looking at how to improve more the metric so as to give the larger base of personnel the occasion to be compensated. There existed a feeling amongst the workers that the incentive program was a “pie in the sky plan” as many personnel members worked so hard to attempt to realize the metric but fell short in obtaining fiscal recompenses (Delong & Vijayaraghavan, 2003).
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Winn’s second goal was to inculcate a spirit of competitiveness in the staff against other gaming clubs and amongst themselves. This competitiveness entails stimulating the employees to focus on refining their performance while realizing progressive outcomes in client services. The third goal entails focusing on employees, where Loveman, in particular, wanted to assure the employees that they are significant component and “the heart” of the Harrah’s Entertainment enterprise. Winn’s fourth goal was to reduce attrition, which is, perhaps, the most significant purpose for the incentive plan, in order to lessen the workers’ attrition that stood at an average of 45%. The incentive program formed a major part of the employee retention program as it proved to be successful by dropping attrition to 34% in one year.
To have a better grip on the effectiveness and failings of the current Winn’s employee incentive plan, the ensuing SWOT analysis is examined.
Strengths. The incentive plan had its strong points in forward thinking approach and ideas that made it stand alone in terms of competition. This plan was put in place to focus on employees as it provided an additional quarterly funding of $200 so that employees could concentrate on customer service. Furthermore, this plan enabled the reduction in employee attrition to 34% from 45% on average. Also, the Total Rewards Program instituted by Loveman helped increase the interactions between consumers and employees. Consequently, it helped to bring back recurrent customers. This also helped Loveman achieve his goal of making consumers feel like they were at home inside Harrah’s casinos, though being in reality away from their homes.
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Weaknesses. The significant shortcoming with the incentive plan was the aspect that the overhead of $200 left some personnel disgruntled as the amount was too low. This dulled their interest and involvement in the program as it compensated only the most interested employees, thus constraining the package to be short-range in its efficiency. The plan also had zippo effect on snowballing the overall revenue stream of Harrah’s Entertainment, Inc.
Opportunities. There were numerous opportunities that needed exploration in the incentive plan. If the plan gets designed properly, the program has the capacity to motivate a larger base of personnel. Given that Harrah’s Entertainment is an industry leader in talent management, its concentration on employee retaining would logically attract talents to Harrah’s. This attraction could force a strategy rethinking of the gain sharing program to target different wage earning levels. Also, the workforce being hired should understand the functioning of the market-based strategy and have the capability to reason outside the box in progressing Harrah’s in the open market as an industry front runner considering the Total Rewards Program.
Threats. Harrah’s limiting factors are the gaming industry’s stringent codes of practice which make employees unenthusiastic to interact with clients. The plan had concentrated so much on customer service at the expense of tethering the relevancy of the incentive plan to influencing operational performance for an increase in revenue. As such, the plan’s grading systems could conceivably leave too many workers out of consideration.
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Even though customer service at Harrah’s is viewed as the center of every employee’s job, the reward package needs to be changed. This change should not involve the total abandonment of the employee bonus program tools as Harrah’s has been successful in achieving results through it. Moreover, the gain sharing plan that was instituted was functioning in aiding to grow customer service. However, it failed to increase revenues. Loveman requested Winn to present him with a revised plan since the incentive plan had reached a plateau stage. The plan helped the business realize some short-term outcomes in reducing attrition and increasing customer service, and as such, this gain sharing program should be continued albeit with seven recommendations. The first recommendation involves recompensing personnel for sustaining the realized levels as opposed to moving the standard further away from accurate prospects. If customer service tallies declined, the business could not give the performance payout.
The second recommendation is a concentration on stimulating new openings for the development in customer service in order to compensate employees for new and ground-breaking concepts for the customer service package. The thirdd recommendation lies in the fact that Winn can focus on increasing retention of Harrah’s through identifying its strategic goals and implementing a communication plan that guarantees every staff member recognizes how they can affect optimistic gains to the businesses’ operative revenues .According to Bai, Brewer, Sammons, Swerdlow (2006), Lam, Chan, Fong, and Lo (2011), this entails engaging market-based personnel who appreciate the value of marketing into the business and help sell the firm through day-to-day exchanges with the clients.
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The fourth recommendation entails implementing a mix or an array of pay for performance plans like spot awards and management by objectives (MBO’s) together with incentives to reach the diverse levels of personnel. According to Milkovich, Newman, and Gerhart (2011), these plans would entail having the same goals to be realized. This could be consumer service, for instance, lower level employees partaking in the incentive plan and the following level up supervisors being motivated through an MBO client service metric. This type of metric differentiation would help link lower-level workers’ incentives, thus assisting in increasing revenues within the units.
The fifth recommendation entails recompensing communication and training with spot bonuses to assist mix together with personnel through tapping into their communal resourcefulness. The sixth suggestion implies establishing team prizes that could be very advantageous in increasing the frequency of involvement by the groups like pit teams, maintenance staff, and restaurant workforce. According to Belogolovsky, Bamberger (2014), Hou, Priem, and Goranova(2014), team spot or incentive awards are useful in helping personnel put pressure on each other to succeed. The first level is the personal level present at a maximum of $200. The second level would involve a joint incentive if the general team customer service tally increases.
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The seventh suggestion will entail the use of spot awards to decrease employees’ attrition. This recommendation implies making retention of a companywide policy by rewarding those members of staff who participate in decreasing attrition. According to Schneider, Macey, Barbera, Martin (2009), Rajshekhar, and Javalgi (2006), effecting this strategy will create an environment where the executive team shares the company’s challenges and problems with its employees. This will, in turn, motivate the employees effectively to aid in the development of solutions.
According to Aamodt (2016), Milkovich, Newman, and Gerhart (2011), employees are the key to the heart of any successful company’s strategy. At the end of the day, these are the employees who carry out the plans developed by upper management. Therefore, for employees to help establishments become successful ventures, there is a need for putting in place a strong psychosomatic contact with employees. However, in the absence of any measurable reciprocity, such a contact can be broken. As such, it is never merely enough to motivate employees to partake in organizational strategies, additional interventions like career advancement, recognition, visibility, exchanges for commitment, and loyalty that should be implemented. In this respect, all the organizational and corporate strategic plans should incorporate a set target and need for evaluation and measurement from the perspective of employees. According to Dessler and Phillips (2012), firms that do not use blinders in their decision making processes and also employ a check and balance mechanism in their strategies often become more successful and amass a larger market share.
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In implementing this new approach based on the recommendations above, Winn should focus firstly on motivating, encouraging and soliciting buy-ins from the employees in regard to new initiatives. Secondly, blinders should be removed together with Loveman’s decision making through self-critiquing the strategies and examining it from various perspectives. Thirdly, a feedback loop mechanism should be developed whereby the workers who ultimately carry out the plan would share their input. Fourthly, a reward system that recognizes employees’ contribution as per the recommendations should be instilled. These series of steps can be organized into four phases.
In the first phase, the internal service quality will entail addressing concerns related to employee workplace, job design, employee selection, analysis of reward systems, and assessment of available tools for customer service delivery. The second phase of employee satisfaction will imply delving into an issue of employee retention and employee productivity in line with the external service value stage. The external value phase entails examining how the elements in the second phase can lead to customer satisfaction and customer retention. The last phase, the revenue growth phase, will assess how the first three stages can contribute to increased sales and profitability.