TABLE OF CONTENTS TABLE OF CONTENTS...................................................................................................1 INTRODUCTION..............................................................................................................

2 Was the bonus payout program an effective motivator, and if not, how should it be revised, or what should it be replaced with?...................................................................4 REFERENCES...................................................................................................................8

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INTRODUCTION
With more than 80,000 employees, Harrahs Entertainment, Inc. is the worlds largest provider of branded casino entertainment through operating subsidiaries primarily under the Harrahs, Caesars and Horseshoe brand names. Harrahs Entertainment 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. And, Harrahs Entertainment had successfully raised customer satisfaction and lowered employee turnover with the implementation of a team-focused gain-sharing program (among other factors). In this case study, when Gary Loveman joined the organization as COO he made a shift to focus on customer service. In order to improve customer service the company needed to help its employees expand their skills and embrace the change. Loveman hired Marilynn Winn to run HR and change how the company engaged in people development. Winn created a three pronged plan to develop Harrahs human capital. The plan concentrated on first compensation and benefits; second, property products and services, which would include training and assessment; and third, executive search and leadership development. Also, Winn created a new reward system to motivate employees and improve the companys customer satisfaction scores. In the highly competitive gaming market, the need to attract and retain customers is critical to business success, as customer loyalty and satisfaction can make or break a company. Harrahs has been extremely successful in gathering data about its nearly 40 million customers through its Total Rewards program. Harrahs has gained market share and reduced operational costs through better analysis of its customer data, such as 2

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customers Total Rewards card usage, and gaming patterns and preferences. By identifying trends in this data, Harrahs has been able to create customized, special offers through its Total Rewards incentive program.

I. Describe the bonus payout program employed by Harrahs Entertainment This case study is about hiring policies and reward system at Harrahs Entertainment. Harrahs want to install an incentive pay plan that instill competitive spirit in the employees and competing against rival casinos as well as their own past records. In my opinion, it is excellent benchmark to start the project and the efforts of Harrahs in converting the product based company to marketing based company. They brought new experts in database marketing from other industries; they introduced Total Rewards program that helps to understand customer preferences. It is not surprising to know that the long-term managers and employees felt entitled to be employed in Harrahs regardless of their performance. This was the big challenge to Phil Satre when he took over the company as the president. He wanted to replace the institutional priorities of long-term tenure and employee happiness with ideals of excellence and customer satisfaction. This does not mean that Satre threw the employees under the bus. He brought a new human resources manager, Winn, who is familiar with field operations. He hired Gary Loveman, who is very familiar with Harrahs operation, as a new Chief Operating Officer. New hiring philosophies were introduced. Instead of hiring a person who meet the job requirement, Harrahs want to hire the best person for that particular position. I am pretty sure that can be accomplished only with higher pay and rewards. It is not easy to satisfy casino customers who, in most of the cases, lose money. It is the establishments responsibility to make the customers happy by providing valuable experience so that they will come back again. Loveman and Winn worked hard to train 3

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their employees to provide such an experience. Loveman introduced gain sharing program where employees were rewarded for improving customer service regardless of the improvement of operating income. Managers used to be awarded solely based on the improvement in the operating income. Loveman changed that structure. Now, Customer satisfaction determines 25 % of the bonuses. It is interesting to know the regulations in the casino industry. If an employee hand shake a customer, that employee has to raise his/her hand, pull the sleeves and show the hands to the cameras installed at the ceilings. This procedure is followed to make sure that the employee did not get any bribe. But the negative part is that employees were hesitant to hand shake with the customers. Was the bonus payout program an effective motivator, and if not, how should it be revised, or what should it be replaced with? In order to evaluate whether the bonus payout program was an effective motivators or not, we first look at the strength and weakness of this program. After that, we will discuss some addition factors which Harrahs Entertainment did not mention.

1. Strength and weakness of bonus payout program: To motivate and get employees energized, Harrahs had instituted an incentive pay plan in order to reward employees in all its properties for improving overall customer service metrics. Harrahs 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 companys strategic customer focus plan.

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Harrahs 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 companys operating income. This allowed the company to hold mangers more accountable for managing their teams effectively and successfully contributing towards Harrahs customer reward program. Despite its much strength, the gain-sharing program was not as effective in gaining the expected lever of customer satisfactions. Harrahs 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 companys operating income. Any such strategic incentive program should be tied to companys 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, Harrahs increase in overall customer services through the gain-sharing program did not result in increased bottom line for the company. 2. Some ideas for Harrahs Entertainment The new challenge that faces Winn and Loveman is how to continue growth in their customer service program because the program was a continuous improvement 5

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program, the low-hanging fruit has been picked. Raising service improvement levels was becoming harder and harder work. It is difficult to keep employees motivated and focused on customer service when the plateau of service has been reached, they continue to work hard but no longer see bonus rewards. While customer service at Harrahs is seen as the focus of everyones job the reward program requires change. At the same time, Harrahs has been successful in achieving results through its employee bonus program and they should not completely abandon the tool. One solution is rewarding employees for maintaining the achieved levels instead of moving the benchmark further away from realistic expectations. If customer service scores decreased the organization could not give the performance payout. A second solution that could inspire new opportunities for growth in customer service could be to also reward individuals for new and innovative ideas for the customer service program. Ms. Winn should reevaluate the incentive program she had designed to motivate employees to partake in companys strategic plan on focusing on customer satisfaction. First, the incentive plan should be tied to the companys bottom line. In other words, Harrahs should, on a regular basis, measure the effectiveness of the gainsharing 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.

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Third, Harrahs should solicit feedback from employees and include them in the overall evaluation of the gain-sharing programs 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 companys bottom line either through gain-sharing or other medium would get additional budget to reward their employees monetarily. In addition, Harrahs could utilize various organizational currencies such as employee recognition, advancements, and visibility in as motivational factors. As part of the employee focused plan, Harrahs should allow employees input how to be more customer focused, efficient, cost conscious, and effective organization. further the organization. The upper management should then leverage these input to devise long-term strategies to

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REFERENCES
1. http://jaylee.business.ku.edu/MGMT%20419/Cases/Harrah's%20entertainment %20rewarding%20our%20people.pdf 8

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2. http://www.icmrindia.org/casestudies/catalogue/Marketing/MKTG105.htm 3. http://brandonwjones.me/2010/03/30/gary-loveman-and-harrah%E2%80%99sentertainment-case-review/ 4. http://www.consultingcase101.com/harrahs-entertainment-tries-to-increase-casinoprofitability/ 5. Fundamentals of Human Resource Management, Third Edition, Raymond A. Noe.