Posted by: Ellen O'Rourke | November 3, 2010

HBR: Harrah’s entertainment, Inc.: Rewarding Our People

The Harvard Business Review case study “Harrah’s entertainment, Inc.: Rewarding Our People” examines the companies shift from a service-driven company to a customer-driven company through its investment in people development and bonus rewards. 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 Harrah’s 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” (Delong and Vijayaraghavan 4). Also, Winn created a new reward system to motivate employees and improve the company’s customer satisfaction scores.

Getting casino employees engaged in customer service was a difficult task and required a paradigm shift from industry expectations. The casino industry is highly regulated and as a result employee interaction with customers is also regulated. The regulation meant that “employees always chose less contact with customers, not more” (Delong and Vijayaraghavan 6). Winn instituted a program where employees were rewarded “for percentages of improvement in customer service scores within the department and within the property, collected through the Targeted Player Satisfaction Survey” (Delong and Vijayaraghavan 6). Loveman ensured that every employee understood that “‘{i}f you improve service, irrespective of financial performance, you will still get rewarded.’ And by mid-2001, Harrah’s had paid out more than $16 million in bonuses to nonmanagement employees through the gain-sharing program” (Delong and Vijayaraghavan 6). The new challenge that faces Winn and Loveman is how to continue growth in their customer service program “{b}ecause the program was a continuous improvement program, the low-hanging fruit had…been picked. Raising service improvement levels was becoming harder and harder work” (Delong and Vijayaraghavan 1).

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 Harrah’s is seen as the focus of everyone’s job the reward program requires change. At the same time, Harrah’s 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.

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