Organizational Behavior response on Harrah's Casino

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Case Study
Harrah's Entertainment Inc.: Rewarding Our People

Harrah's entertainment is the world's largest gaming company (Harrahs.com). However, just because the company is the largest in its industry does not mean the company has not faced challenges. During the 1990s Harrah's started losing market share and profits decreased. In 1999, Harrah's changed its company strategy from its long time approach of competing by building bigger and better buildings to focusing on customer satisfaction. Over the past few years Harrah's has invested heavily in two major issues: increasing customer satisfaction and improving employee motivation. Harrah's knows that employees are critical to customer satisfaction and thus to the success of the business.

Currently, Harrah's is struggling with balancing employee motivation with increasing customer satisfaction. Profits are down, the economy is sluggish, and it is more important than ever to insure employees are happy and customers are satisfied. Harrah's has always given a lot of attention to its employees' feelings and thoughts and continues to do so today. Nevertheless, too much employee loyalty through the years has led to some employees not wanting change. Some employees still want to complete tasks the way they were done years ago. The mentality of some of the employees is not focused on customer satisfaction. The employees are focused on the prior ways of competing, which is on the aesthetics of the casinos. Change is necessary and getting employees to adapt to being motivated to improve customer satisfaction is a must. The Harrah's HR manager, Marilyn Winn, is under pressure to make the employees feel valued while motivating them to change.

In 1999 a new reward system was initiated to help employees focus on customer satisfaction. Employees were rewarded money for improving customer service. A total of $16 million was paid out in reward bonuses by the middle of 2001, and yet customer service levels were not where they needed to be. There were a lot of controversies to whether the incentive plan to improve customer service was working. Some managers expressed they did not like that 30% of their bonus was made up of employee feedback and 40% customer service metrics. If managers had to take disciplinary action on an employee, that particular employee could have given a poor assessment of the manager or acted poorly toward a customer. Other managers liked the incentive plans and thought it brought a lot of excitement to the employees. On the other hand, employees who worked hard to meet the goals and improved customer satisfaction without meeting the target were frustrated. The employees thought the goals were too aggressive and were getting discouraged.

The bonus payout program is an effective motivator but should be revised. As shown throughout the years since the program was first introduced, there has been some positive improvement. The turnover rate is down, how fast employees get to customer when called has improved significantly, and lower-level employees are ecstatic that they have the potential to get a bonus. Nevertheless, since there is still room for improvement; there are several suggestions that we offer to Marilyn Winn on how to address revising the incentive plan. We also have additional suggestions on getting employees to feel appreciated.

We asked Scott Langser, a person familiar with casino bonus systems, what he thought about the current situation with Harrah's and bonus systems in general and he replied, "During my 24 years as Sr. VP, Treasurer and Secretary with Kirk Kerkorian and MGM MIRAGE, my experience was (a) the bonus system for upper level executives was based only upon profitability, whereas (b) the bonus system for the rank and file was based upon the development of a company-wide bonus pool ...