By Gary Loveman

This is a pretty nice and short yet highly effective article that outlines the importance of providing an exceptional customer service in today’s service industry, especially in the gaming industry as it is the case of Harrah’s Entertainment casino. Actually, from its inception, Harrah’s former CEO Phil Satre had instituted this policy of “changing Harrah’s from an operations-driven company that viewed each casino as a stand-alone business into a marketing-driven company that built customer loyalty to all Harrah’s properties”.

In doing so, Satre asked Gary Loveman to head a strategy to affect this change in all Harrah’s organizations, and so Loveman did follow through on this task. He effectively focused on delivering customer service and on understanding and marketing effectively to the customer. This is the secret to Harrah’s success, which allows him and Harrah’s to maintain loyalty from its customers based on the database they had collected over the years, as they were able to identify their customers’ needs and wants as well as to have good reward and incentive programs in place to recognize their clientele according to the time and money they spend gambling over their facilities. Yet, for their workforce, Harrah’s instituted a bonus system tied to job satisfaction. “Rewards hinge on everyone’s performance at a casino- and on customer satisfaction, not a property’s financial performance”.    

Also both Satre’s and Loveman’s secret was not to built fancy or extravagant facilities “billion-dollar casinos” as it was not the most prudent use of capital because “the returns on such buildings often waken when the novelty wanes”. But rather, they strive on dazzling customers with exceptional service. What a smart strategy.

Another interesting point I found on this article was that Harrah’s treats its valued customers differently; however this is not to say that Harrah’s treats any of its customers poorly, on the other hand Harrah’s implemented a system of total rewards cardholding customers, divides it into three groups: gold, platinum, and diamond, and treats each group differently- that is Harrah’s rewards customers for spending more.   

In summary, to develop all these marketing and service-delivery strategies, Harrah’s CEO Loveman pulls intuition out of the picture and makes his strategies based on fact and evidence, so he heavily relies on the database collected and lets the data speak for itself and “suggest the specific marketing ideas to us” so that Harrah’s gets to know its customers better and better and be able to adjust its marketing strategies to stay ahead of the game.

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By Victoria Chang and Jeffrey Pfeffer

This was a very good article that clearly exhibits a great example of leadership by Harrah’s former CEO Phil Satre setting the company up for success when he stated: “Within a year of hiring Gary Loveman, I was patting myself on the back. I thought I was a pretty smart guy for hiring him and shame on me if that was taking a little too much credit, but I did. I thought Gary was doing a terrific job, and I thought he was just the right medicine”.

I love Satre’s statement. He really shows transparency on his words and actions all the way up to his replacement. He recognizes that Harrah’s organization was not performing exceptionally under his administration so he himself calls for a job redesign to mainly restructure the operation and marketing departments. Satre really exercises his role as CEO from start to finish. Better yet, he realizes that things are going extremely bad so he makes a decision, without consulting his staff, to bring somebody to take over his post, a person that brings value not only to Harrah’s company, but also to customers (CEO’s most important function).

Satre appoints Gary Loveman as the new Harrah’s COO, a very personable and humble person to be around and work with, with great potential and leadership skills who had worked with many young managers on several people-oriented projects, Loveman’s forte, at Harrah’s organization. Satre without doubt did an amazing job by hiring Gary Loveman as the Harrah’s COO, a HBS professor who proves he is capable of doing the job and doing it right even though he did not have any experience in the gaming industry whatsoever. Satre made a brilliant decision based on evidence and fact by bringing Gary Loveman into this role, a very smart leader with great positive attitude and motivation, ready to jump into his new role with both feet, took the chance to enjoy the ranks as the Harrah’s COO, and then officially as Harrah’s CEO five years later when Satre stepped down and never turned back.

Satre’s risky choice worked out exceptionally so he absolutely deserves credit for it as well. In hiring Loveman, Satre and all the insiders at Harrah’s felt some kind of strain by bringing an outsider who had never worked in the gaming industry at all, “an industry dominated by insiders who had spent their careers in gaming, working their way up from the bottom”. However, Loveman’s personality and background help him gain respect and credibility rapidly from all the insiders by “working hard to understand not only the industry and the company, but also the operating challenges of our people” Satre pointed out.

Loveman’s leadership skills were incredibly effective and necessary for the success of Harrah’s organizational restructuration in the operation and marketing-related functions. His management style is as a facilitator as he understands that a leader really needs to facilitate the appropriate tools to their team members so they do their job effectively, coach them and mentor them as opposed to controlling them or monitoring them by loosening control and the resources with their management team so that they make decisions that are best for the company. For instance: he decentralizes power by putting the right person into the GM role to run the property, and have the GM report directly to him rather than to a division manager. Therefore, Loveman’s confidence and direction were key management techniques that allow him to lead the Harrah’s group from good to great.

Loveman also describes himself as a high self-monitor, which help him be able to assimilate into groups of people unlike himself pretty well. Loveman’s leadership style also exhibits a double-loop learning trait on his ability and eagerness to learn and adopt new behaviors to affect change, which eventually he did greatly affect Harrah’s marketing and financial operation approach with remarkable results.

Loveman learned how to direct with the mind instead of the heart “effective decision making”, and so he was not afraid of terminating people and getting hindrances out of his way. “He was not interested in what you thought, but in what you knew” (Evidence-Based Management) – that is to avoid making the same mistakes by not analyzing the data mining that Harrah’s managers had collected over the time, such customers data that was a competitive advantage that was being ignored by them.

In summary, Harrah’s financial operations and marketing areas were successfully improved under Loveman’s management. Furthermore, Harrah’s company had a turnover of 24%, a very low rate for the service industry at the time of this article. So, Loveman’s did a phenomenal job by demonstrating the determination and intelligence needed to improve Harrah’s financial performance.

By Jeffrey Pfeffer and Robert I. Sutton

I love the above article. Pfeffer and Sutton did a very well done job by showing a very tightly relationship of the concepts of using Evidence-Based medicine to make decisions in the medicine’s field with using Evidence-Based Management to make decisions in the business world.

According to Pfeffer and Sutton, doctors’ and managers’ behavior is the same as they both look to cure their organizational and patients (employees and clients) ills. Yet, Pfeffer and Sutton present us in this article a great association (correlation and causality) of managing our organizations based on fact and evidence “No brag, just facts”- that is using valuable information that is researched out there, updated, and put it into practice with predictable results which will help teach us make effective decisions in the workplace as opposed to going with what we were taught in college, told by friends (empirical learning) or what we just think it seems to work- that is unethical.

In fact, that is what happens in the real business work environment. We see managers all the time looking for a quick fix in their organizational systems, they rely heavily on first-hand information or experiences which is by far easier to comprehend, requires less effort, and therefore they just manage what they see versus data mining that is out there in books, articles, or journals, etc., which requires more effort, investigation, and energy in behalf of managers. That is difficult to take into action, since many managers have been practiced for so long that they assume they know the solution, they are unwilling to invest more time on researching information, make wrong decisions that bring nothing but damaging actions that cause a negative impact to the organization’s customers and employees, and the worst: “Yet it is important to remember that if you only copy what other people or company do, the best you can be is a perfect imitation”.   

Pfeffer’s and Sutton’s work really opens the doors for a self-evaluation. We need to change the mind-set on managers and executives, and begin to nurture an evidence-based approach. “If we ask for evidence of efficacy every time a change is proposed, people will sit up and take notice”.

Hence, Pfeffer and Sutton identity six substitutes that managers, like doctors, often use for the best evidence:

  • Obsolete knowledge
  • Personal experience
  • Specialist skills
  • Hype
  • Dogma
  • Mindless mimicry of top performers

If we really want to lead an organization from Good to Great, this is my recommendation:

  • Teaching managers “smart people” the right mind-set and methods for practicing a strong evidence-based management. In doing so, participation should be asked at all multiple departments (levels) in the organization “Cross-Functional team work”. There also should be a system in place that encourages everyone to be willing to take risks in the process of adapting such management technique, be open to accept some flaws in the work and get feedback to work openly to fix it. The shared organizational goal should be:  an improved company performance.

In conclusion, the concept of using Evidence-Based Management should be widely disseminated and it should be used in the business world to cure the organizational ills effectively and ethically.

Good to Great, or Just Good? by Bruce Niendorf and Kristine Beck.

Unlike the Indepth: Iraq and the IC community mechanisms, this article above exhibits a different approach of group think or collective presumption by Niendorf and Beck challenging not only the author’s assertions in his book: “Good to Great”, but also their own assumptions. Collin’s study was based on 11 companies that performed just great for a time period of 10 fiscal years. Yet, in this article Good to Great, or just Good? Niendorf and Beck have done an amazing research by trying to reveal some flaws in Jim Collin’s methodology and the failure to apply some statistical techniques to test his assumptions; assumptions that according to Jim Collin’s 5 principles will shift a company from good to great?

I think that Collin’s assumptions are kind of unfounded and off base. What makes his article pretty interesting to read is that it is full of powerful quotes of high level leadership, for instance: the 5 principles outlined in Collin’s paperwork which he claims will lead to sustained great results. However, in reality this article brings clearly nothing but a set of commonalities that of course existed among successful companies at the time of Collin’s research, but nothing else.

I also liked the section termed: “Weaknesses of This Study”, in which they both Niendorf and Beck challenge not only Jim Collin’s 5 principles in his book “GTG”,   but also their own research by stating that their objective was to test Collin’s claims, that they may have gotten things wrong or there may have been factors unknown to them, but Collin’s research would still remain flawed.  

In summary, Collin’s greatest mistake of his work presented in his book was the delusion of correlation and causality. Of course correlation exists when he attempts to prove that his 5 principles shared by those companies lead to greatness, however it is almost impossible to prove any causation because of so many different environmental and financial considerations.

INDEPTH: IRAQ

March 24, 2010

United States Senate Select Committee on Intelligence: report on pre-Iraq war intelligence
CBC News Online | July 09, 2004

This article reminds me a lot Jesica’s story article, as far as the flawed system that was in place as it clearly outlines the factors that led the United States Senate and the IC community to presume that Iraq had growing weapons of mass destruction without verifying the rumors or facts, which I believe this led to the war in Iraq that is currently going on. Hence, this failed system took the IC community along with other professional organizations in the country to establish some mechanisms to fight back Iraq’s internal systems. This is without doubt a concerning issue that involves innumerable social organizations across the world, most importantly the United States Senate and IC community, as their group think or collective presumption failed due to the lack of verifying the information they were getting (grew overconfidence), therefore their ideas or thoughts were so strong that they were not challenged and they had their minds set as much as challenging them will slow down their plan of action.

The IC failed mechanisms really have left much to be desired not only to the United States Senate but also to the entire society in the world when it came to ethics, accountability, professionalism, etc. The IC committee should have constantly monitored and evaluated their internal systems, processes, and information by challenging themselves (playing devil’s advocate for the group) to never grow confidence, as this latter could have certainly originated the current war in Iraq.  If the IC managers would have checked the information obtained from the Iraqi exiles and dissidents more closely, none of this would have happened.       

In summary, growing confidence brings nothing to group think but wrong systems in place based on ineffective decision-making from managers due to the lack of challenging their ideas as to exactly what plan of action should be taken “We cannot make good decisions without knowing the facts” (Good to Great principle).

Strategies of Effective New Product Team leaders by Avan R. Jassawalla and Hemant C. Sashittal:

This is a great article that outlines great strategies of effective leadership based on a study they did on new product development “NPD” processes in ten high-technology firms, most of which use a cross-functional team work: “The transformation in team leaders’ thinking; learning, and doing which lies at the root of effective leadership, effective team work, and accelerated NPD processes” the authors pointed out. Below, please see the key points I took away from this article, key components that I consider fundamental in building a cohesive, loyal, and innovative cross-functional teamwork yet effective skills that will give an organizations a competitive advantage nowadays.

  • Effective New Product Team Leaders: give their organization a competitive advantage by increasing product innovation and product completion timetable to deliver marketable products faster and cheaper.
  • Organic Structure: effective new product team leaders are able of instilling and implementing a team work spirit, open communication, and an atmosphere of trust; respect, and collaborative decision-making among Managers-Team-Individuals: (Triangle for Managing the New Team Environment), and better yet of seeking out the shared organizational purpose.  
  • Adaptability: effective team leaders’ objectives and strategies are formative because they change over time in response to new environmental cues and new learning which transform the action of the NPD processes and their teams (especially in a technology field where a competitive advantage could be imitable).
  • New Team Environment versus Old Work Environment: effective team leaders have a multi-cultural perspective; they are able to have people with different backgrounds and with different viewpoints on their teams yet manage that great diversity of talent in pro of their organizational goal, which will eventually allow them and their team members to develop confidence, more innovation and an ability to take risks which is key in the learning and development process. With this being said, team leaders really get the most out of their teams.
  • Healthy and Positive Communication: effective team leaders should not be withholding important information about what is going on, but rather they need to constantly inform  and give feedback to subordinates about the operation results, their performance, etc. so that they both are on the same page.  In fact, this creates a better working relationship between boss-subordinate (two-way communication system) and commitment from both parties to their new product initiatives.
  • Facilitators: leaders really need to facilitate the appropriate tools to their team members so they do their job effectively. They also need to coach them and mentor them as opposed to controlling them or monitoring them by loosening control and the resources with their team so they make a decision that is best for the team.   
  • Senior Management “SM”: effective new product team leaders should have the backing of SM as these latter really need to allocate resources to support all the multiple departments involved in the new product initiatives not just R&D as well as giving access to the same information so they avoid conflict by having entrenched functional silos in place.
  • Double-loop learning: is clearly exhibited on the team leaders’ ability and eagerness to learn and adopt new behaviors and change, and not resisting learning or changing which could lead to repeatedly make the same mistakes. Better yet, the leaders must be open to their team discussions and even challenge them and not adopting a condescending attitude; that would be unethical.  

In conclusion, effective new product team leaders really are a fundamental part in the organization’s effectiveness as they help build a cohesive, loyal, and innovative cross-functional team work from inside out.

Be careful what you pay for, you may get it

Similar to Arrow Electronics’ compensation and EPR system, this case study outlines an incentive system gone awry, as it details the problems termed “the sins of commission” that arise when the city of Albuquerque incorporates a flawed system that would reduce the work hours over the garbage truck drivers. I am big on bullet points so see below the most interesting irregularities I found out of the case above:

  • Overview: this case study takes place in the city of Albuquerque, NM. The city faces a problem with its garbage collection due to the lack of completing the assigned routes on time by the garbage collectors which results in a huge bill for overtime pay, so the city implements an eight-hour workday for the truck crews to complete their routes by figuring they would be highly motivated by finishing up their tasks quickly and efficiently, although not effectively.
  • Bottom line: to have a cost-effective process by cutting the overtime pay.
  • Unethical decision-making: the city exhibits an unethical approach from start to finish as it doesn’t consider the garbage truck drivers’ viewpoints who are ultimately the ones affected by the work hours reduction , nor anticipates the fatal errors that would come along with the time maximization such as: driving over the speed limit which potentially leads to accident and fines; miss stops, skip garbage so a second truck needs to go pick up the skipped garbage, break rules as far as the legal weight limit is concern, so rather than being less expensive the system ends up being more expensive and costs problem to the city of Albuquerque.       
  • Failed System: it wasn’t a very cost-effective process whatsoever as it didn’t outline the expectations appropriately, and the worse the city did mess with people’s money, and employees’ money/incentive is something that we don’t want to play with as it is hard to earn. Therefore, overtime incentive system failed and so did the eight-hour workday.  
  • Financial incentives: “they shouldn’t be used to drive behavior, but instead to provide recognition and to share the company’s success with its employees” Pfeffer pointed out. This is absolutely right, as we know that job satisfaction and loyalty from employees come through other intrinsic motivational means that produce nothing but a healthy work atmosphere which leads to employee retention, higher productivity and profit than an incentive pay.

In summary, the city of Albuquerque should have had a good financial incentive in place not to appease its workforce but to motivate them and reward them for good work. Also, it should have clearly specified to its drivers what the expectations were with the eight-hour workday implementation so that everybody was on the same page and held accountable for the job. The rest would have been just mechanics: operation hours, overtime, stagger drivers, staffing accordingly, etc.

I found the case above to be very interesting as it presents the controversy again about the use of employee performance review EPR and compensation systems at Arrow, whether they should get rid of them, such flawed systems that we certainly know promote nothing but an atmosphere of intimidation and manipulation between boss and subordinate, as a result team morale is truly affected due to the loss of trust, and so is productivity. We have been discussing about these compensation and EPR topics in class. However, my question still remains the same: how can employees be truly evaluated by the same parameter when we know that everyone is different? Well, this case starts off pretty much like the previous ones we have studied; however it develops some interesting dynamics that makes Arrow’s flawed EPR and compensation systems one-of-a-kind:    

  • Background: Arrow was founded in 1935 as a retailer of radio equipment. From its inception Arrow showed leadership in the electronics industry by adapting its strategy as the electronics industry changed. Its products range from radios, transistors, microprocessors, to medical instruments, to computers, to semiconductors. In 1995 Arrow became the world’s largest distributor of electronic components and computer products with sales of $6 billion operating in North America, Europe, and Asia/Pacific regions. The head-quarters are located in Melville, NY.        
  • CEO: Steve Kaufman- respected and charismatic. His role is to execute the company’s strategy. His responsibility is to guide the strategy of the company, and to ensure that it is carried out properly. His major concern is getting the right people in the right slots and motivating them. The rest is just mechanics for him: that is budget reviews; capital expenditure reviews, resource allocation, mindless staff, and committee meetings.
  • Competitive advantage: is his people.
  • Sales force: very large sales force, marketing team, and purchasing team. CEO Recruited young college-educated people named “idiots right out of college”, trained them for 26 weeks, and then put them to work. So early on the way these new sales reps started to compare their salaries to older sales people’s that have been working at Arrow for 10 to 15 years; that originated a system of inequity that brought in nothing but jealousy and unhealthy relationships among the sales people.
  • Loyalty: came from pay (promises of money and promotions), so this is CEO’s greatest mistake as he prepared his salespeople so well that they became incredibly marketable and easy to jump into different jobs in different companies by being simply offered higher pays. So the turnover at Arrow is extremely high- a sales rep works for the company over a four year span, and then moves on.  
  • Motivation: is extremely driven by pay (which is natural in the sales industry- bonuses and commissions). So Kaufman did create this condition of extrinsic motivation on his sales force instead of instilling a teamwork spirit which eventually will encourage salespeople make intrinsic motivation a personal choice, and with that save tons of money by retaining his employees.
  • Single loop learning: is clearly exhibited on CEO’s inability to change the flawed system in place that is judging people by numbers and not by their behavior; not separating pay and EPR, not hiring job hoppers, and the worse, adopting a condescending attitude “the ruler”.
  • Customers: IBM, Intel, Motorola, HP, among others; to me they all should feel some kind of strain due to the lack of establishing long-term business relationships between them and Arrow’s salespeople which is attributable to Arrow’s high turnover.

This is a great example of a company that nurtured nothing on its sales force but a stupid system based on compensation and employee performance evaluation at Arrow Electronics – money (cash, bonuses, commissions). The good thing is that Arrow’s CEO Kaufman notices this system does not work so he calls for a job redesign.

In summary, this case study is all about money-oriented, not people-oriented as the sales force did not even care to grow in and with the company, all they really wanted was money and movement. So, I enjoyed reading this case of Arrow Electronics.

By Samuel A. Culbert

How can an employee truly be evaluated by the same performance review system? As the author mentioned in the article: “performance review destroys moral, kills teamwork, and hurts the bottom line. And that’s just for starters”. I too believe in that assertion as I have gone through a lot of “quality” performance review at work and they just bring nothing but negative feedback from both the boss and the people that evaluate you, self-interest again from both boss and coworkers (your enemies), and the worst an atmosphere of intimidation and manipulation that promotes nothing but unhealthy relationships in the workplace due to the lack of trust. As a result, you no longer seek out the shared organizational purpose, but rather your own self-interest to not only please your boss but mainly to survive in the battle. So I really found a lot of great points in this article to be applicable in my current job situation:

  • Performance preview instead of performance review: this is great as you really need to provide transparent feedback to your subordinates on a daily basis in regards to the operation results, individual’s performance, projected plans, and so on and so forth to foment a teamwork spirit where everybody is on the same page and is held accountable for the job.
  • Two-way communication system: boss-subordinate; so we have authentic conversations for the betterment of the operation system- that is how can we work together better as a team by airing out the issues, clear them up before they become hindrances, and the best to contribute to team development which leads to productivity, and productivity equals profit.
  • Straight-talk on time: rather than waiting a whole year to bring up the list of all the failures, to come up with a plan to fix it, and as a result to be more productive by effectively performing according to plan.      
  • Trust: waiting a year to address all the failures eventually leads to lose trust, so this is the last instance we want to happen in the organization. Yet, everyone is different, so how can everyone be truly evaluated by the same performance review system?

Ultimately, intrinsic motivation is key in meeting the performance review standards, however motivation rests on people and we can’t really motivate someone as we don’t know what motivates them. People’s strengths are much more ambiguous and difficult to imitate and measure as we don’t know what makes people special, so that is why we need to get rid of performance review.

Rather than luck, the success of SAS Institute is more about the management philosophy and the systems they held onto from its inception.

  • Background: SAS was founded in 1976 by Dr. Jim Goodnight, and other three members: Anthony Barr; Jane Helwig, and John Sall. Their product- statistical analyses of data software. In 1971, Jim obtained a Ph.D. in statistics from N. C. State Univ. from which him and his partners obtained SAS rights in exchange of providing the campus free upgrades of the software. SAS had a solid client base so it was profitable from day one; most importantly SAS had no debt, nor did have to go public, which allowed Jim to manage the company in the best interest of its customers and its employees at SAS. Jim’s oppressive work experience with GE working on the Apollo Space Program led him to adopt a different role management style at SAS.
  • Philosophy: Based on 4 principles:
  1. Treating everyone fairly and equally
  2. Intrinsic motivation: trust and respect
  3. Think long-term
  4. Bottom-Up decision making

It is amazing how the company has its systems based on respect and sustainable philosophies where people can thrive in and with the company.    

  • Competitive Advantage: SAS invests on Research and Development.
  • Leadership: knowledge-based business; long-term vision, centralized power- rests with the corporate office, Jim controls headcount and authorizations to hire, promotes creativity and intellectual growth from with.
  • Workforce: SAS employs more than 5000 people, really low turnover- they reassign employees instead of allowing them to turnover, SAS doesn’t offer stock options, merit increases are given once a year, no financial compensations- that is SAS makes sure its people take care of the customers all the time not just when it is time for bonuses or raises therefore it places less stress on meeting sales or revenue goals.
  • SAS spirit: southern-style culture described as being nice, friendly, and informal; incredibly customer-oriented culture, look into friendly personalities, innovation, family-friendly workplace, self-direct, trust, citizenship behavior.
  • Recruitment and Selection: they look for talented people end keep them, they hire locals, college students, but mainly candidates who are willing to help each other out- that is to fit into the SAS culture of cooperation, teamwork, and mutual respect.
  • Competitive threat: SAS has no single competitor that provides the range of software products that it does.
  • Organizational structure and career development: SAS gives people the opportunity to change jobs and get training within the organization; managers are working managers- hands on.
  • Performance appraisal process: it is not considered very important at SAS which means that they do trust on their people performance by giving them the tools to do their job and then get out of the way.

In summary, SAS institute is a great example of a company that shows their employees that it cares and so employees give the same back which instills a healthy partnership: growth through excellence.