Archive for October, 2009

Gary Loveman and Harrah’s Entertainment

My previous post is a brief discussion of the accomplishment of one man and groups of employees at Harrah’s Entertainment.  This post will actually go a little more in-depth into how Harrah’s came to be the people’s casino.  Basically, it all started with the risky move by the CEO of Harrah’s Phil Satre to bring in a professor from Harvard Business School with little practical experience under his belt.  However, a change was obviously need and Satre felt that Loveman could deliver.

What Loveman brought to the table was not only his ability to be an effective leader, but also and IS system that effectively determined a marketing strategy to enhance the customers experience at their casinos.  This IS system drew on information about every thing from where they gambled to how much, how long, why they played certain games, and what kind of rewards they were looking to receive.  He was constantly testing and finding new marketing strategies and practices. 

It was also the fact that he was able to successfully rearrange and restructure the Harrah’s culture into one that promoted personal responsibility and individual efficiency.  He did not need to micro-manage the employees because he had created an environment that lended itself to self-motivation and task efficiency.  Overall, although initially a risky move, the outcome of the hiring of Loveman was a complete success.  So far, it has been maintainable; lets just hope that it can last.

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Diamonds in the Data Mine

This week i read an article about how Harrah’s Entertainment has differentiated itself from the rest of the casino crowd.  Coming from a person that actually lives near 2 of the Harrah’s casinos, i thought that this was particularly interesting article.  Although, literally living only 15 minutes away from their casino my entire life, i have actually not spent that much time in the casino itself.  If only I had realized that they provided more than just the gambling atmosphere but a friendly, inviting, and comfortable place to be.

The question I think most people and competitors are asking themselves is “how are they able to be so successful when the economy is not?’  The answer is simple they actually do and use research to develope and promote themselves and the product they are selling.  The product is not only a unique gambling experience but also customer service that sets them apart from the others.  They value people’s long-term worth and not their single visit value.  They pride themselves on spectacular customer service.  They tap into the minds of their customer and analyze their needs, tracking not only their local actions but nation wide.  They create rewards programs that provide the desired incentives to keep the customer happy and coming back.  In generally, they have revolutionized the way people feel while at a casino and what they expect from their visits.

Chapter 10 Readings

I personally found this article on “Dean’s Disease” refreshing.  For years I have been complaining about the current deans at the college I attend and how they abuse their powers.  As the cliche goes, the use them for evil and not good.  This holds true to most people who hold a position of power in my opinion.  They get this power-hungry feeling and cannot let go.  That is not to say that they start out this way.  They usually begin with good intentions and high hopes of making changes for the better.  Yet, that idea slowly gets pushed outside along with most if not all personal values.

This kind of value neglect doesnt only take place with deans and those in education.  It happens with most people in positions of power and higher authority.  However, the true leaders are those who act with integrity, based on knowledge and information.  A good leader is one who is able to recognize their own weaknesses and strengths and also the strengths of those around them.  They use they powers for good and not evil.   They actually care about what they are doing and how it affects those around them.

Evidence- Based Management

In this article i saw some reminisce of the previous article Good to Great,in the fact they both agree that there needs to be hard evidence to support the decision management makes for the company.  In this article however, there is more of an emphasis on the actual research side of the decision-making process.  In other words being constantly aware of the things that may affect the business.

The fact is, is that most companies have become so comfortable and engrained with their current culture that it becomes difficult for them to actually venture out and find that information.  In my opinion, if the organization had created a system that actually had people researching to begin with, then the idea of evidence-based research would not be such a mind-blowing phenomena when introduced to a company.  However, there is a fine line between doing your own research and having a unique company and just being a good imitaiton of a successful company.  At no point will the imitation ever be as good as the original.   I definitely think that this idea is a not a revolutionary idea but it is definitely an idea that should be incorporated into the decision making process.

Is it really the good?

I have personally never even heard of the book Good to Great, but what is particularly interesting is how fast a book can become a valuable source for information when there has been no empirical proof that it is true.  Being a person of math and numbers, and wanting a definite answer and reason for everything, I can see why Niendorf and Beck wanted to review the book and its implications on the business world.

The main point is that they have no actual data that supports their claims of the five key components to having a successful business.  Just because current successful companies share some common threads of operation does not mean that those threads are what makes them a success.  There are many more factors that can result in the success of a company.  The key factors that lead to GTG failures in providing evidence was the ideas of data mining and association v causation. 

In both, they neglected to find hard evidence that any situation or event that actually lead to a successful company.  Dont get me wrong, i think that there a definitely some positives that can be taken from this book.  I dont think that i should be completely written off as a book of no value; it should be considered a book with good suggestions and ideas for a company to get a jumping off point.

Group Think

The article I read this week was about the concept of group think.  Basically, it is the notion that all the people working in a particular group all just simply agreed with the common ideas of the group and did no think outside the box or from a different perspective.  Group think, as stated in the article, can lead to decisions being made that had detrimental effects. 

Without all the information, how can there ever be a clear and factual answer or solution.  The CIA is supposed to be one of the best intelligence gathering organizations in the world.  How can it be that an organization that is supposed to be one of the most well functioning groups in the world, be the biggest users of “group think”.  I think in most companies there comes a time when the people there begin to get complacent with their current work, either because it is not what they want to do, is not intellectually stimulating, or they are just lazy.  However, the company cannot just look beyond this complacency, they must take action and quickly to ensure that the group think is destroyed. 

Not looking beyond what is right in front of you can have serious consequences like in the article on Iraq.  A willingness to actually go and be proactive in a company and find all the pertinent information is what is needed in order to make educated and knowledge decisions.

Commission or Bust

The article by Jeffrey Pfeffer about the troubles that the follow the use of a commission system is another in a smattering of article that discuss the backlash that commission systems face.  In this article however, he also give some really good examples of not only large scale companies that have tries to use a commission system as well as larger companies. 

What I got from this article is that there really is not a good example of a successful commission system.  With every commission system there are the downfalls.  Most notable the fact that the employees uses this system to get the most amount of money by doing the least amount of work.  There is also the fact that people are no longer working to benefit the company but to benefit themselves.  It is hard to maintain an intrinsically motivated sales staff when the only thing they are interested in is how much they can make and not how much they actually like their job. 

So when a company is initiating a commission system in their company because they have motivation issues they should not do it because it “offers a mirage of a quick fix”.  They should really take a look at their company system and culture and see where the problem actually lies.  As the article says, “be careful what you pay for, you may get it”, the good, the bad, and the ugly.

Arrow Electronics

For the last couple of weeks I have been reading articles about the pros and cons of performance evaluations and commission incentives.  With the huge success and longevity of the electronic’s company Arrow, i really wasnt anticipating reading this case study about the turmoil within.  Basically, the question is whether or not their current commission and review system should be maintained or a new system brought in. 

In my opinion, i have yet to see a commission system that has benefited both the company and the employees.  Commission does not motivate to make the company do better only themselves and arrow is no different.  Furthermore, their attempts at creating a new system of performance review has serious downfalls.  First of all, there is no clear expectations as to what each category means.  Also, the CEO Steve Kaufman puts this added pressure on the managers to maintain a certain quota of people who are below and above average.  The fact that each person is required to have a score of 2 in at least one category has a dramatic effect on how everyone is scored.

With no consistency in the system at Arrow, there are no clear expectations in a persons work or on how they are reviewed.  In my opinion I think that the best option would be to have some other sort of incentive plan that eliminates the commission system and the performance review.  Of course no one system for works for every body, it all depends on the system and the culture of the company.

Team Leaders

This week I read an article about what kind of strategies effective team leaders use to develop new product.  They begin by giving a list of basic things that an effective team leader will need and have.  To simplify those things they are: good communication skills with team members and outside factors, having an internal locus of control or taking responsibility for the goals of the team, actively involving all members of the groups, having a good support system, and a good balance of technical and human interactions . 

However, these teams are not just all the same people from the same department.  They are cross-functional groups, including people from every aspect of the business: engineering, manufacturing, marketing, and production.  These groups are created to work together and develop products faster and cheaper.  Also, a key to this function is that fact theses leaders should be actively communicating with each other about all aspects of the project and divulging pertinent information.  One of the major downfalls to a lot of companies is the fact that each department keeps their knowledge under lock-and-key and dont share information with others whom it might be beneficial to.  These team leaders should be creating an environment that goes beyond the bullsh*t of the office and openly discuss issues.

In general, the article makes great points about how an effective team should look like and function.  The key is to have a group of people from all areas who have the communication skills and leadership abilities to foster productivity and product development.

Nordstroms

Who knew that under the facade of extraordinary service was a darker side of the high end fashion scene at Nordstroms Department stores.  I for one have always thought so highly of the, in my opinion, overly priced clothing store.  It was a place that the rich and credit extended people went and received the most lavish service of all the department stores.  However, after reading the case study about the dissension that is occurring among the sales staff, i have started to see the high end fashion store as just another place where they want your money at any cost.

The main point of the case study is that Nordstroms’ sale employees are either not reporting all the hours they have worked or have been told not to report all the hours.  I my opinion the reason why they are not wanting to report all their hours is because of the commission and promotion system that they use.  There are definitely situations in which a commission program can be a motivator to do your best work and better the company.  However, in this case the employees are not motivated to better the company but only to do what is best for them.  Their SPH program (Sales Per Hour) is not what I would consider a good motivator but more of a stress and possible job liability. 

I am not saying that all of the extra services that Nordstrom’s provides are not a necessary or desirable asset to the company.  What i am saying is that not paying people for the work that they do because they are afraid that it will hurt their SPH numbers is not a good system.  There are parts of the system that I think are good for the employees and the company.   For example, the fact that they promote from within offering manager positions to those who have worked hard and deserve it.  Also, i dont think that they should change the system to the point that it will affect the treatment of the customers and what the outstanding service they already provide. 

I think my main question is how can a company with some notoriety have so many underlying problems?  Also how can there be so many complaints from one branch and not in others?   I think that it really stems from the management.  The fact that each store has its own sort of creative freedom to run the store how they see fit I think is where the problem starts.  Therefore, they have created these silos of discontent and satisfied employees.  For a company that is still run by some of the original Nordstrom Family, how could they not know that there was so many problems within the company?  Also, should other department stores still be using Nordstrom as the epitome of a successful operation?

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