Harrah's Entertainment, Inc.: Rewarding Our People Custom Case Solution & Analysis

1. Evidence Brief: Business Case Data Researcher

Financial Metrics

Annual Revenue: Harrahs reported 4 billion dollars in 2002 revenue across 26 casinos in 13 states (Exhibit 1).
Program Cost: The Rewarding Our People (ROP) program distributes up to 200 dollars per employee per quarter based on property-level service targets (Paragraph 12).
Market Performance: Harrahs outperformed the S and P 500 and the Dow Jones Gaming Index between 1999 and 2002 (Exhibit 2).
Customer Worth: Cross-market play, where customers visit more than one Harrahs property, accounts for a significant portion of revenue growth (Paragraph 8).

Operational Facts

Headcount: Approximately 42,000 employees are eligible for the ROP program (Paragraph 14).
Measurement Tool: Customer service is measured via the Customer Satisfaction Survey, specifically focusing on the percentage of guests who provide an A-list or Superior rating (Paragraph 15).
Incentive Structure: Bonuses are triggered when a property exceeds its previous best-ever service score or hits a pre-defined improvement target (Paragraph 17).
Geography: Operations span diverse markets including Las Vegas, Atlantic City, and riverboat locations in the Midwest (Paragraph 5).

Stakeholder Positions

Gary Loveman (CEO): Asserts that customer loyalty is driven by service interactions rather than physical capital like hotel rooms or statues (Paragraph 3).
Marilyn Winn (SVP Human Resources): Emphasizes that the ROP program must remain simple and focused on the front-line employee to remain effective (Paragraph 22).
Property Managers: Express concern that property-level goals may feel unattainable if the baseline is already high (Paragraph 25).
Front-line Employees: General sentiment suggests appreciation for the cash bonus, but some perceive the team-based metric as unfair if individual performance varies (Paragraph 28).

Information Gaps

The case does not provide the exact correlation coefficient between A-list service scores and actual spend per visit.
Specific turnover rates for ROP-eligible employees versus non-eligible staff are absent.
The case lacks data on the cost of administering the survey versus the incremental profit generated by the service improvements.

2. Strategic Analysis: Market Strategy Consultant

Core Strategic Question

How can Harrahs sustain its service-led competitive advantage as the ROP program reaches maturity and property-level targets become increasingly difficult to hit?
Is a standardized, team-based incentive model sufficient to drive the individual behavioral changes required for elite service?

Structural Analysis: The Service-Profit Chain

The Harrahs strategy relies on the link between employee satisfaction, service quality, and customer loyalty. The ROP program acts as the primary mechanism to operationalize this chain. However, the analysis shows two structural tensions:

Diminishing Returns: As properties reach high A-list scores, the marginal effort required to improve becomes exponential, while the bonus remains capped.
Measurement Validity: Using a single metric (A-list scores) to trigger bonuses assumes that guest ratings are a perfect proxy for employee effort, ignoring external factors like casino payouts or facility age.

Strategic Options

Option	Rationale	Trade-offs
Tiered Performance Individualization	Introduce department-level or individual modifiers to the property-wide bonus.	Increases motivation for high performers; adds significant administrative complexity.
Dynamic Baseline Resetting	Adjust targets based on statistical variance and market-specific conditions.	Ensures fairness across different property types; risks appearing manipulative to staff.
Non-Monetary Recognition Expansion	Shift focus toward career development and internal promotion as primary rewards.	Reduces cash outlay; may fail to motivate low-wage front-line staff who prioritize immediate income.

Preliminary Recommendation

Harrahs should adopt a Hybrid Incentive Model. Retain the property-level bonus to encourage teamwork but introduce a Departmental Excellence Modifier. This ensures that a high-performing housekeeping team is not penalized for a poor performance in the food and beverage department. This maintains the simplicity Winn desires while addressing the fairness concerns of the staff.

3. Operations and Implementation Planner

Critical Path

Phase 1: Metric Audit (Days 1–30). Review the last eight quarters of A-list data to identify properties where scores have plateaued. Determine if the plateau is due to employee fatigue or survey saturation.
Phase 2: Pilot Departmental Modifiers (Days 31–60). Select three properties (one high-performing, one average, one struggling) to test the hybrid bonus structure.
Phase 3: Managerial Training (Days 61–90). Train property managers on communicating the new targets. The focus must be on transparency regarding how scores are calculated.

Key Constraints

Survey Integrity: Any change to the incentive structure risks encouraging employees to coach guests on how to fill out surveys, which would destroy data quality.
Payroll Systems: The current IT infrastructure for payroll must be able to handle variable bonus calculations across different departments without errors.
Union Relations: In markets like Atlantic City or Las Vegas, changes to compensation may require negotiation with local labor unions.

Risk-Adjusted Implementation Strategy

To mitigate the risk of employee confusion, Harrahs should implement a Floor Guarantee. For the first two quarters of the new system, no employee should receive less than they would have under the old system. This creates a safe transition period. Execution success will be determined by whether the correlation between service scores and cross-market play remains positive during the transition.

4. Executive Review: Senior Partner and Executive Critic

BLUF

Harrahs must evolve the Rewarding Our People program immediately. The current property-wide incentive model has reached a point of diminishing utility. While it successfully unified the culture around service metrics, it now risks breeding resentment among high-performing teams tethered to underperforming departments. The company should move to a department-level incentive structure while maintaining the data-driven rigor of the Total Rewards system. This shift preserves the service-profit chain while addressing the operational friction of the current model.

Dangerous Assumption

The most consequential unchallenged premise is that guest satisfaction scores are a direct reflection of employee behavior. In reality, these scores are heavily influenced by the luck of the gambler and the physical state of the property. If a guest loses a significant amount of money, they are statistically less likely to provide an A-list rating, regardless of the service quality. Basing 100 percent of the incentive on this lagging, subjective indicator is a structural weakness.

Unaddressed Risks

Metric Manipulation: As targets become harder to reach, the probability of employees gaming the system increases. This results in inflated scores that do not translate to actual loyalty or revenue.
Talent Attrition: High-performing employees at low-performing properties will seek employment elsewhere if they feel their bonus is consistently suppressed by factors outside their control.

Unconsidered Alternative

The team failed to consider a Profit-Sharing Overlay. Instead of purely service-based metrics, Harrahs could link a portion of the bonus to property-level EBITDA. This would align employee interests with the financial health of the business and provide a hedge against instances where service scores are high but profitability is low.