HBS: Harrah’s Entertainment, Inc- Rewarding Our People This article is a case study of hiring policies and reward system at Harrah’s Entertainment Harrah’s 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 I think it is an excellent benchmark to start the project Also, I am impressed with the efforts of Harrah’s 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 Harrah’s 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 Harrah’s operation, as a new Chief Operating Officer New hiring philosophies were introduced Instead of hiring a person who meet the job requirement, Harrah’s want to hire the best person for that particular position I am pretty sure that can be accomplished only with higher pay and rewards I understand that it is not easy to satisfy casino customers who, in most of the cases, lose money It is the establishment’s responsibility to make the customers happy by providing valuable experience so that they will come back again Loveman and Winn worked hard to train 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 handshake 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 Template by Missing Link Images from Shutterstock.com 1937, Harrah’s Inc was founded by William F Harrah at Reno, Nevada 1971, Harrah’s Inc went public 1980, Harrah’s Inc was acquired by Holiday Inn 1990, Holiday Inn Hotel business was acquired by Bass PLC and The Promus Companies was formed 1991, The Promus company's headquarters was moved from Reno to Memphis, Tennessee 1995, the company was renamed to Harrah's Entertainment, Inc as a spin off 1999, Harrah's Entertainment, Inc moved its headquarters from Memphis, Tennessee to Las Vegas 2005, Harrah's completed the takeover of Caesars Entertainment, Inc 2008, delisted and taken by Hamlet Holdings2010, renamed to Caesars Entertainment Corp http://en.wikipedia.org/wiki/Caesars_Entertainment_Corporation Incentive Program Bryan Ashline Linda Larsen Nathan Phillips Stacey Papanikos Phoebe Stonbely Fadong Yan Introduction History Background HR strategy Strengths Weaknesses Recommendations Conclusion History Headquarter: Las Vegas, Nevada Employees: over 85,000 70’s: Bill Harrah’s era Harrah was particular about the condition of the properties Mid 80s, Satre took over as president They did not want to share information across properties 1997: Operation strategy change from product-based company to marketing based company 1998: Average turnover rate of 45% 2001: Struggling economy after 9/11 disaster Background Financial 2002 Harrah’s shareholder report Summary of Property Information Harrah’s Entertainment Inc 2002 annual report Executives Harrah’s Entertainment Inc 2002 annual report Increased customer satisfaction & employee morale Employee turnover went down from 70% to under 50% in one year Encouraged working together & team building Gainsharing payout would be paid regardless of the operating income results Strengths of Gain Sharing Program Who is actually taking the Targeted Player Satisfaction Survey (TPSS)? Surveys are more often taken by un-happy customers How was individual level of performance measured? Bias by management is likely No absolute level to reach, solely based on percentage increase $200 not a huge motivator for employees Particularly those with a higher pay Will employees continue to have interest in the program if payouts not increase? Mixed opinions/acceptance of program High cost to organization -$16 Million in ½ years Benefit? Did not translate to improved company profits Weaknesses of Gain Sharing Program In order to align with the organization’s differentiation strategy, Harrah’s must provide superior customer service to distinguish itself from competitors Goals: Improve customer service Reduce turnover Achieve financial goals Reward employees Recommendation Question What types of incentive plans you think would best help Harrah's reach it’s organizational goals? Invest in human capital Motivate employees Create new incentive plan Recognize employee contributions Solutions $200 Customer Satisfaction Payout is not an effective motivator $16 million too costly to Harrah’s bottom line Does not reward employees for maintaining excellent customer service; only rewards for converting non A grades to A’s Low valence Eliminate Gain Sharing Program Recommendation Harrah's Gain Sharing Program HR Strategy Marketing-Based Company Large Size Mature Stage Formal/Hierarchy Culture Job Security & Distributive Justice Economic Recession Post 9/11 Travel Impact High Competition Industry Regulations EEO Requirements OrganizationalDemands Environmental & Regulatory Issues HR Challenges Differentiation Strategy - Customer Service Driven - Harrah’s Total Rewards -“Home Away From Home” Employees Critical to Success - High Level of Customer Contact - Need Stable Workforce - Build Competitive Culture - On-Going Improvement Refocused Organizational Strategy Compensation & Benefits Goals/Incentives Property Products & Services Training & Assessment Reduce Turnover Executive Search & Leadership Development Functional vs Industry Knowledge Internal Promotion/Development Tripod Structure Winn’s HR Plan Strategy Execution - Recruitment & Selection Knowledge Based Exams Better Interview Process Realistic Job Preview - On-Boarding Process Eliminate “Quick Quits” Support New Hires Development & Training Lower Turnover Build Competition - Goal/Incentive Programs Challenge, Motivate, Reward - Gain-Sharing Program (Customer Service Improvement) Show Commitment/Loyalty - Specialized Training Opportunities Customer Service Two Days, On-Site, Paid - No Layoffs Competitors Reducing Staff Profit Sharing Stock Options Encourages collaboration and teamwork among employees Controls labor costs Aligns employee contributions with the goals of the entire organization Profits are important! Introduce Profit Sharing Plan Based 50% on customer satisfaction and 50% on length of employment Does not require the reinvention and implementation of a new performance management system Too costly and time consuming Recognized by cash payouts at company BBQ Profit Sharing Plan for Non-managerial Employees Non-managerial Employee Performance Evaluation Examples of Payouts Mary has been employed at Harrah’s for years and received an A on her customer satisfaction survey (TPSS) = 100% of profit sharing payout Joe has been employed at Harrah’s for years and received a B on his customer satisfaction survey (TPSS) = 75% of profit sharing payout Jane has been employed at Harrah’s for months and received an A on her customer satisfaction survey (TPSS) = 10% of profit sharing payout Mike has been employed at Harrah’s for 10 years and received an D on his customer satisfaction survey (TPSS) = 25% of profit sharing payout Profit Sharing for Managerial Employees Based on components: 25% Multi-Source Feedback 25% Length of employment 50% Operating Income Allows for comprehensive and accurate evaluation of managers Rewards for longevity Rewards teamwork Managerial Employee Performance Evaluation Breakdown of Managerial Performance Evaluation Multi-Source Feedback Evaluation Question What are the advantages and disadvantages of this profit sharing plan? Increases committment of employees Provides incentive in years of no profit Allows employees to buy and sell shares for year and realize gain immediately Price of share based on performance and length of employment Capped at 35% Introduce Stock Option Plan Stock Option Plan Details for non-managerial employees Stock Option Plan for Managerial Employees Bob is a cashier and has been employed at Harrah’s for years and months He received an A on his customer satisfaction survey (TPSS) so Bob is eligible to buy Harrah’s stock at 50% of it’s market value for year Jennifer is the Manager of Valet and has been employed at Harrah’s years and months Jennifer received a B on her Multi-Source Feedback Evaluation so Jennifer is eligible to buy Harrah’s stock at 87.5% of it’s market value for year John is a Senior VP of Marketing and as been employed at Harrah’s for 13 years He received a C on his Multi-Source Feedback evaluation so John is eligible to buy Harrah’s stock at 85% of it’s market value for year Examples of Stock Purchases Would this incentive plan motivate you? A: Yes B: No Why or why not? Question Motivates employees to provide excellent customer service Rewards employees for length of tenure which reduces turnover Promotes teamwork Recognizes employee contributions Aligns HR Strategy with organizational goals and culture Conclusion