Case Study - Harrah's Entertainment

Memorandum

To: Gary Loveman

From: Marilyn Winn

Subject: Incentive Plan

Date: 02/15/15

It has come to my attention that our current incentive plan here at Harrah’s Entertainment, Inc. could benefit from some restructuring. Our present gain sharing model was intended to further customer service as well as motivate employees. On the surface, this model does exactly that. Employees are rewarded as customer survey responses rise. In theory, employees shall strive to increase guest satisfaction in order to receive such incentives and employee turnover shall decrease in response to these rewards. However, in practice, it is not so simple.

The gain sharing program has been successful in that customer service has improved, turnover has decreased by 20% and employees incentives totaled $16 million in the previous year. This high payout cost suggests that customer service goals were continuingly met throughout the year, benefiting both our customers and our employees.

The main downfall of our current incentive plan, of course, is the cost. In the present economic state, revenues are not quite as high as they once had been, causing the additional $16 million in expenses to feel rather inflated. While financial compensation has proven to be an effective incentive, it may be difficult to maintain such high costs.

Furthermore, the current program has seemed to cause tension among departments and employees. Rather than instilling a competitive spirit against rival casinos and their own past performance, competition has risen among team members. In order to have a successful incentive program, all employees and departments must work together to achieve overall guest satisfaction. In addition, incentive payouts have had a somewhat negative affect on employee commitment and motivation. When goals become too difficult to meet and employees work hard without any compensation, they’re more than likely to stop trying.