Follow-up on Harrah's Casino Discussion

I felt that the in-class discussion of the Harrah’s Casinos case left one important point untouched. Many of the issues that were referenced in class dealt, in one way or another, with the problem of the current bonus system. The current procedure was based on performance reviews that were filled out by customers. If the ranking that a department received improved from a “B” to an “A” over a certain percentage of the reviews, than the employees of that department were then eligible for bonus pay.
The major topic that was discussed in class was the question of how to fix this bonus system so that instead of a 4% improvement barrier, there was a more tiered system of bonus levels. Thus, if the performance improved by 2%, employees would still receive bonus pay but it would not be as substantial as if they had achieved a 4% level of improvement. Many people suggested that such a tiered system would be clearly superior to having a minimum benchmark which created tension amongst employees when they nearly reached the 4% goal. In addition, having tiers above 4% would create for additional incentive to improve customer satisfaction by more than this single benchmark.
Although I agree that a tiered system would be an improvement upon Harrah’s current bonus system, it seemed to me that everyone in the class failed to notice the fault in not having a minimum value which has to be reached. By allowing for bonuses at 1%, the company would allow for a large probability of a bonus being awarded based on coincidental improvement in customer satisfaction. For example, if one month there just happens to be more pleasant customers, who naturally note better reviews, than a 1 or 2 percent change might occur. However, such a small change would have nothing to do with the employees of the company. Therefore, I feel that a minimum benchmark of around 2% would still be necessary, along with the tiered solution. This would allow for a more accurate representation of the performance of the companies employees.
I was very surprised that no one else brought this point up in class as it is crucial to the overall “fairness” of the bonus system, which is something that all of us were worried about. Not only does it provide for a more balanced environment for the company, in which they are not throwing away money, it also creates for a situation where all employees must sincerely work towards a bonus as opposed to some people being handed a bonus randomly as other, who worked harder, receive a comparable incentive.

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Comments

Wow. I really enjoyed your quantitative approach, Artur. It is ironic, that while we are constantly working with numbers in our HR project, the majority of us focus our papers qualitatively.

The overall "group think" of the class regarding the tiered solution was to encourage workers and provide sufficient motivation to prevent the "this this bull****, I give up" sentiment, which seemed to be an inevitable result of the current policy.

I know you already knew that, but regurgitating this information makes me feel important and makes my post longer as well.

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