Harrah’s Entertainment: Rewarding Our People

November 9, 2010

Strengths and Weaknesses of Harrah’s Gainsharing Program                                      
Business Case Analysis

Harrah’s Entertainment gainsharing program was born from the need of the company to regain the competitive edge the company had been holding in the industry in the seventies and till mid-eighties.
The foundation of the company’s reputation was established by the founder of the company – Bill Harrah. It was based on the two premises:

• Pride of the employees for working for “the best in the business”
• Particular attention to the condition of the properties

Based on the success of the company in that time period we can assume that this strategy was working. However by the mid-eighties, when Phil Satre became the CEO, he believed that the company was losing its competitiveness. He specifically believed it happened because of the atmosphere of complacency that had been inadvertently fostered by the tradition of employees’ loyalty. In a way, this loyalty lead to stagnation, when long-standing with the company people, especially executives and managers, were holding tight to the old “tricks” and could not appreciate the need for change. As Loveman, the COO of the company, felt, the ideals of excellence and customer service were replaced with priorities of long tenure and employee happiness.

This was how the company was losing to its competition. The building out of new properties was calculated to be not as beneficial as usually thought, because the effect of “newness” was not financially appreciable after just two years. 

What could be a real differentiating factor in re-gaining and keeping bigger market share was customer satisfaction. The goal of increasing employees’ motivation to provide outstanding customer service was the reason for introducing the gainsharing program.

This program showed its effectiveness in increasing both customer satisfaction and employees loyalty. It also fostered the team building spirit within departments and on broader organizational level, because the results were based not on the individual performance, but the functional team’s success. A great feature of this gainsharing program was that it was not tied up to the financial performance of the company, i.e. the gainsharing payout would be paid regardless of the operating income results.

Even though the program had some noticeable positive effect on the increase in customer satisfaction, there were some flaws in the system:

• The objectives to be reached for getting the gainsharing bonus were not sufficiently fine-tuned. This lead to the situations when teams missed their payout, just by a sliver. If this continued long enough the employees would lose motivation, because they would believe that the goal was unattainable.
• The amount of the gainsharing payout was capped at two hundred dollars for a quarter. Even some executives conceded that it was more of a symbolic value, not a lot of money.

In the light of its symbolic nature, it would be advisable to develop additionally some other non-monetary ways of recognition for excellent employees. And even to have some sort of non-monetary reward in situations when the team has improved their metrics in customer satisfaction, but maybe missed it by a narrow margin. This  would offer recognition and keep the employees motivated.