Posted by: A.R. Cherian | October 29, 2009

Harrah’s – Delivering on Customer Service

Harrahs_Reno

Harrah's in Reno

This is the second of two posts on Harrah’s Entertainment Corp. This week’s case study was from the Stanford Graduate School of Business entitled “Gary Loveman and Harrah’s Entertainment” (2003), prepared by Victoria Change and Jeffrey Pfeffer.

It was a detailed look into the background of the hiring of Harvard Business School professor Gary Loveman as COO of Harrah’s in 1998 and his rise to CEO in 2002. The case had great interviews of Loveman and his predecessor, Phil Satre, who made the controversial decision to hire Loveman in 1998. It helped show some of the thought-processes behind the decisions of the two CEOs.

In my last post, I touched on how Harrah’s used a first-mover strategy in using IT as a competitive advantage in the casino industry. I’d like to touch on another aspect that led to their success in the early 2000s – exceptional and intentional customer service.

Loveman realized that the innovations Harrah’s had would be meaningless if they did not focus and deliver on a great customer service experience. This is critical in the casino industry, where happy customers usually become loyal customers. Loveman decided to link employee rewards to customer satisfaction. The better the experience the guest had, the more money a Harrah’s employee stood to make. If a property’s overall customer satisfaction rating rose 3% or more (measured by surveys), then each employee could earn $75 to $200 in bonuses. In 2002, Harrah’s paid $14.2 million in bonuses to non-management employees based on their property’s customer satisfaction scores.

A great quote by Loveman that should be pertinent to any manager in a customer-service focused industry is below

Meeting budget at the expense of service is a very bad idea. If you’re not making your numbers don’t cut back on staff.

The quote connects to what we’re learning in class: satisfying your employees will help in turn to¬† satisfy your customers who in turn will deliver the top-line growth that is necessary for your company to grow and thrive.

Most companies will say they focus on great customer service. But unless it becomes an infrastructure and employees know that management takes it seriously and will reward employees for it, it will just become lip-service. Harrah’s is a great example of a company that delivered on great customer service as a key strategy led by top management.

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