Case Overview 

Harrah’s Entertainment, a fortune 500 and one of the largest casino entertainment companies 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.  At the heart of Harrah’s reward program are its employees
who would ultimately carry it out in the field.  Therefore, to motivate and get employees
energized, Harrah’s had instituted an incentive pay plan in order to reward employees in all its
properties for improving overall customer service metrics.  Harrah’s 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 company’s strategic customer focus plan.
 
Through Harrah’s strategic customer reward program, the company gained the market share;
however, it is not quite at the expected level.  As such, employees in many properties did not get
the incentive payout regardless of their tireless effort.  This resulted in employees feeling like
their hard work was not recognized and that the management kept raising the bar on customer
service goals.  Harrah’s head of Human Resources was concerned that employees could
ultimately become discouraged which would result in a failure of the company’s new strategic
plan on improving customer service

Are Harrah’s rewards large enough to be used as incentives? How much

money makes management’s commitment seem credible?

Ms. Winn should reevaluate the incentive program she had designed to motivate employees to
partake in company’s strategic plan on focusing on customer satisfaction.
First, the incentive plan should be tied to the company’s bottom line.  In other words, Harrah’s
should, on a regular basis, measure the effectiveness of the gain-sharing 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.  Third, Harrah’s should solicit feedback
from employees and include them in the overall evaluation of the gain-sharing program’s
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 company’s bottom line either through gain
-sharing or other medium would get additional budget to reward their employees monetarily.  In
addition,
Harrah’s could utilize various organizational currencies such as employee recognition,
advancements, and visibility in as motivational factors.  As part of the employee focused plan,
Harrah’s should allow employees’ input how
to be more customer focused, efficient, cost conscious, and effective organization.  The upper
management should then leverage these input to devise long-term strategies to further the
organization.

Did the gain-sharing plan improve organizational learning and co-operation?

What difficulties did Harrah’s face in increasing co-operation and
communication between work team members?

Harrah’s gain-sharing program had successfully instituted a competitive mindset in its

employees and increased customer service level.  Through the program employees had statedto
understand that they had a stake in improving the overall customer service.  The gain-
sharingprogram 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 company’s operating
income.  This allowed the company to hold mangers more accountable for managing their teams
effectively and successfully contributing towards Harrah’s customer reward program.

Despite its much strength, the gain-sharing program was not as effective in gaining the
expected lever of customer satisfactions.  Harrah’s management kept raising the bar on their
expectations on customer service improvements whereby implicitly indicating that
employeeswould not be able to meet the targeted results.  The caused a breach in the
psychologicalcontract 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 company’s operating income.  Any suchstrategic
incentive program should be tied to company’s 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, Harrah’s increase in overall customer services through the gain-sharing program didnot
result in increased bottom line for the company

What are the pitfalls of increasing the percentage of rewards versus base pay?
What if the company handed out fewer, but larger awards? Should bonus
pool be fixed or varying according to overall financial results?

Through Harrah’s strategic customer reward program, the company gained the market share;
however, it is not quite at the expected level.  As such, employees in many properties did not get
the incentive payout regardless of their tireless effort.  This resulted in employees feeling like
their hard work was not recognized and that the management kept raising the bar on customer
service goals.  Harrah’s head of Human Resources was concerned that employees could
ultimately become discouraged which would result in a failure of the company’s new strategic
plan on improving customer service
The disadvantages of increasing percentage of rewards versus base pay would be:

 Increased level of competition which would lead to higher turnover, stress, absenteeism etc.
 Lack of team effort and co-operation.
 Growth of the individual in monetary and non monetary terms but not of the group or
department.
 Lack of job Security due to reduced base pay which would lead to higher turnover and
reduced organisational citizenship behaviour.
 Employee will focus more on meeting the numbers of performance rather than increasing the
performance quality.
 Employees will decrease focus on customer service and focus on servicing more customers
rather than servicing with quality.

If the company starts handing fewer but larger rewards then turnover rate would increase as most
employees would be left with no incentive and only the so called individual star performers would be
happy leaving the rest of the employees dissatisfied and having similar disadvantages as the
individual incentive scheme.

The bonus pool should be variable because of the following reasons:

 It would provide a way for judging how well a property is doing among the properties doing
well.
 The employees will get to know how well they are doing and how much are they contributing
to the organisation’s growth.
 It will initiate healthy competition amongst the employees of different departments and
ensure increased standards of service.
 It will ensure that in a time of economic downturn the company does not suffer loss due to
fixed payment of incentives.