Directions: Answer the following questions in short answer format in sufficient detail to address what has been asked and
adequately apply course concepts
. There are no specific guidelines on length - sufficiently answer the questions, understanding this is a graduate course and you need to both:
- Demonstrate you read carefully and understood the case.
- Understand how the case connects to the course material we have covered thus far).
TB0389 Copyright © 2014 Thunderbird School of Global Management. All rights reserved. This case was prepared by Professor Nancy Lea Hyer (Vanderbilt), Brad Hirsch, and Professor Karen A. Brown (Thunderbird) for the purpose of classroom discussion only, and not to indicate either effective or ineffective management. Nancy Lea Hyer Brad Hirsch Karen A. Brown Implementing LEAN Operations at Caesars Casinos In December 2014, Brad Hirsch stood on the gaming floor of the Harrah’s Metropolis Casino and Hotel in Metropolis, Illinois. Hirsch had assumed the position of Senior Vice President and General Manager at this Caesars Entertainment property in mid-2014. Caesars’ culture was strongly oriented toward optimizing the customer experience. This history, coupled with increased competitive pressures and new corporate financial goals for 2015, had created the motivation to intensify improvement efforts at the Metropolis facility. Hirsch had successfully led employee-centered initiatives to apply LEAN1 operating principles in three of the company’s casinos in Tunica, Mississippi. He believed that what he learned from those experiences would be applicable at the Metropolis location, but wondered if he should consider a modified approach that could potentially produce results more quickly with the help of a team of internal experts. In 2014, Caesars Entertainment, based in Las Vegas, Nevada, was the world’s most geographically diversi- fied provider of casino entertainment. With 68,000 employees worldwide, it operated 50 casinos in the U.S., Egypt, England, South Africa, and Canada, under the names Harrah’s, Caesars, Rio, Flamingo, Paris, Bally’s, Horseshoe, and London Clubs International. Its largest concentration of properties was in Las Vegas, where nine of its casinos occupied 1.25 miles on or near Las Vegas Boulevard, commonly known as The Strip. In 2013, the company had net revenue of $8.6 billion U.S. Caesars had developed an industry-leading loyalty-card program, introduced sophisticated customer-service measurement systems, and had been the first to apply LEAN process-improvement concepts to casino opera- tions. (For more on LEAN principles, see Appendix A.) As Hirsch thought about the challenges that lay ahead for LEAN implementation aimed at customer-service enhancement and operational effectiveness at the new Harrah’s Metropolis Casino and Hotel, he reflected on his previous experience in Tunica. LEAN Implementation at Caesars in Tunica, Mississippi At the end of 2008, Tunica, Mississippi, located about a 45-minute drive south of Memphis, Tennessee, was the fourth-largest gaming market in the world with more than $1 billion in annual revenue. Three of Tunica’s nine casinos were owned by Caesars. These three generated $545 million in revenue and accounted for 50% of the Tunica market. Over 4,000 employees worked across the three Caesars properties, delivering hospitality and entertainment services to 8,000,000 guests annually. In late 2008, the economic environment for the Caesars Tunica casinos was a serious concern. First, the U.S. macroeconomic collapse of the Great Recession had led to reduced customer spending on entertainment. As a consequence, casinos in the region experienced declines in revenue, and competition for market share was intense. Beyond the impetus for improvement inspired by macroeconomic challenges, all Caesars-owned properties embraced customer service as an essential element of the corporate operating strategy, and strove to continuously increase customer satisfaction as gauged by rating scores. Every week, Caesars surveyed a random sample of recent customers for each property. Survey respondents assigned scores of A, B, C, D, or F for various dimensions of their Caesars experience (staff helpfulness, staff friendliness, speed of service, and other metrics). Data showed that moving a customer from a B to an A score resulted in up to a 12% increase in customer 1 Caesars Entertainment capitalized the word “LEAN” to emphasize its role as a systematic program and distance it from any connotations associated with a more narrow view that might suggest downsizing. This document is authorized for use only by Quita Morgan (
[email protected]). Copying or posting is an infringement of copyright. Please contact
[email protected] or 800-988-0886 for additional copies. 2 TB0389 spending. On a quarterly basis, weekly service-score data were averaged and used as a factor in determining staff bonuses. The higher the percentage shift of B scores to A scores, when compared to the same quarter the prior year, the higher the bonus for team members. At the end of 2008, the Caesars Tunica leadership team sought to deliver more conversions from B to A scores, both to increase customer loyalty in a hypercompetitive landscape, and to maximize team-member bonuses and enhance employee satisfaction. Members of the Tunica executive team recognized that to reverse the declines in revenue and challenges to profitability, and improve service scores and market share, would require engaging the entire organization. However, one challenge was the absence of a consistent and systematic problem-solving approach through all layers of the 24-hour, 7-day a week business. As one associate observed, “If your supervisor is passionate about casino cleanliness, casino cleanliness becomes your top priority. But your next supervisor, or the supervisor of the next shift, might focus on a completely different aspect of the customer experience.” Hirsch recognized that LEAN, with its easy-to-understand tools and concepts, could create a consistent and focused approach to process improvement for all layers of the business. Kaizen Events as the Organizing Framework for Implementing LEAN at Caesars Tunica, Mississippi, Casinos In December 2008, Hirsch was appointed Regional Director of LEAN for the three Caesars casinos in Tunica. He and the executive team saw the urgency for change, and knew they had to make the right improvements and sustain them. Hirsch created a Regional LEAN Team by recruiting two experienced, high-potential leaders from the casino operations in Tunica, each with a passion for process improvement. The team agreed to orchestrate the LEAN rollout around a series of kaizen events. These were intensive five-day workshops involving employees from multiple functions and levels working together to identify and improve target processes.2 For example, an early kaizen event focused on improving hotel operations—from check-in to check-out. The kaizen team included a department manager, bellhop, housekeeper, front desk clerk, supervisor, information-technology associate, and a gaming-floor employee. The department manager’s participation ensured that she understood the work under- taken during the kaizen week and would be prepared to lead the follow-up activities that grew out of the event. An initial challenge was that, to some casino employees, the word lean implied cutting jobs. To address this challenge, members of the executive team consistently communicated that the goals of eliminating waste via LEAN efforts were to improve the customer experience, increase process effectiveness, teach problem-solving tools, and improve employees’ work environments—not to cut personnel. Sharing this message was important, but Hirsch and his team knew they simply had to start conducting kaizen events so individuals would SEE that jobs were not being eliminated. As Hirsch explained, “We thought our behavior would speak louder than our words, and it did.” The five-day kaizen workshops—each of which followed a similar structure (see below)—yielded immediate, tangible improvements and laid the foundation for post-event efforts to establish a LEAN culture throughout the organization. During calendar year 2009, Hirsch and his team staged 63 five-day kaizen events. These events resulted in improved customer-service scores and $3 million in documented savings. Each five-day workshop in- cluded a set of activities intended to build knowledge, engage participants, solve problems, and develop solutions. • Kaizen Day 1 Every kaizen event began with education about LEAN concepts. A major component of this education was teaching employees to recognize waste (or, in Japanese, muda). Hirsch and his team used a memorable acro- nym for teaching waste recognition that seemed to resonate through the entire organizational hierarchy— DOWNTIME (defects, overproduction, waiting, not engaging people, transportation, inventory, motion, and extra processing). At each kaizen event, the facilitator explained DOWNTIME using examples from the casino environment. 2 C. Marchwinski and J. Shook (Editors), Lean Lexicon: A Glossary for Lean Thinkers, Fourth Edition (Cambridge: The Lean Enterprise Institute, Inc., 2008, p. 41.) This document is authorized for use only by Quita Morgan (
[email protected]). Copying or posting is an infringement of copyright. Please contact
[email protected] or 800-988-0886 for additional copies. TB0389 3 – Defects: Defects are mistakes that result in items being scrapped or reworked. Delivering a drink to a customer with ice when the customer has requested no ice is a defect. Checking a guest into a hotel room with the incorrect bed type (i.e., two queen-size beds instead of a king-size bed) is a defect. In both situations, wasteful rework is required and the customer is left with a poor impression. – Overproduction: This is production in excess of what the customer requires. Customers in one restaurant were sometimes served water with three lemon slices. Most customers were satisfied with a single lemon slice. As Hirsch explained, “Customers write us all the time to tell us what they love about our casinos in Tunica, but occasionally getting additional lemons in their ice water is not a cause for customer delight.” Producing three times as many lemon slices as necessary was waste because it consumed money and time without creating additional value for the customer. – Waiting: Waiting-time waste occurs when employees are idle or when customers must wait for service. Time spent waiting adds no value to the product or service. If a gaming table runs out of a particular dollar-value betting chip, the table-games supervisor signals for a chip replenishment. Chip replenishment is a time-consuming process that, because of regulatory standards and asset protection protocols, requires supervisor verification, travel to and from the cashier cage where money and chips are held, and engaging a security guard to oversee the transport. During portions of the process, patrons and employees sometimes must wait to resume gaming activity, which affects profitability of gaming operations. Similarly, if a hotel- room attendant cannot finish cleaning a room because sheets or towels from the laundry aren’t delivered on time, the attendant may be forced to wait. This yields non-value-creating payroll expense and a delay in room readiness for customers. – Not Engaging People: Organizations incur waste when they don’t routinely ask employees, “What would you change that would make your job easier to do and