Implementing Lean Operations at Caesars Casinos

INTRODUCTION

In mid - 2014 Brad Hirsch assumed the position of Senior Vice President and General Manager at Harrah’s Metropolis Casino and Hotel (a Caesars Entertainment property) in Metropolis, Illinois.  Hirsch had previously been successful in implementing LEAN operation principles at three different Caesars properties in Tunica, Mississippi.    In addition to these employee-centered initiatives, Caesars had an “industry – leading loyalty – card program, (and) introduced sophisticated customer – service measurement systems.” (Nancy Lea Hyer, 2014)

DISCUSSION OF KEY ISSUES AND PROBLEMS

         The Metropolis Casino was relocated and renovated as a decision directly based upon increased competition.  Neighboring states (within a short driving distance) had changed laws that put numerous outlets for limited gaming in many areas that would be traditional draw areas for the casino.  In an effort to entice customers to continue their patronage, and perhaps encourage others to try the casino, Harrah’s Metropolis needed to offer a total entertainment experience that went beyond gaming.  Harrah’s would need to provide value - added experiences that went beyond simple gaming.

Caesar’s Entertainment took a page from their winning playbook to make the customer experience as fresh for their patrons as was the physical facility.  To do so, they called upon Brad Hirsch to take on the oversight of the Metropolis location.  Bringing the expertise of having elevated customer service to a high level while reducing waste in Tunica, Caesars believed Mr. Hirsch could be just as effective in Metropolis.

Caesar’s Casinos captured 50% of the gaming business in Tunica.  During the recession of 2008, the casinos in Tunica were fighting for market share.  Not only were people spending less each visit, the number of visitors were down.  Given Caesar’s facilities embraced customer service as an essential operations strategy, they were proactive in gauging customer satisfaction using a traditional A-F (score rating) format.  Through the use of their own research, Caesars determined that by moving a customer satisfaction score from a B to an A resulted in a 12% increase in customer spending.  

The leadership team at Caesars Tunica made it a priority to convert as many B grades to A grades.  In addition, they wanted to eliminate waste.  With the many successes of LEAN procedures, implementation, and follow through showing increased customer satisfaction and three million dollars in actual savings, Caesars is looking for similar results in Metropolis.

Can Harrah’s Metropolis garner the results of a fully implemented and deployed LEAN system through the use of a much smaller, modified, group of process-excellence experts thereby achieving the results but saving scarce labor hours as well as money?  This problem statement will be fully flushed out in the following discussion.

LEAN service is governed by three guiding principles.  First, “satisfy the needs of customers by performing only value-added activities.” (Pesch, 2016)  In the case of Metropolis, Hirsh recognized areas for improvement almost immediately with a simple walk on the floor.  Getting a customer a large payout in an expeditious manner, for example, is a value-added activity in need of correction following his observations.

Beyond the value for the customer, this example also fits into the DOWNTIME acronym for recognizing and eliminating waste.  A customer (W) waiting is in fact waste and takes away from being customer centric or adding value to their experience.  DOWNTIME is (D) defects, (O) overproduction, (W) waiting, (N) not engaging people, (T) transportation, (I) inventory, (M) motion, and (E) extra processing. (Nancy Lea Hyer, 2014) (Please see appendix A for a complete explanation of each term of the acronym and how they affect waste.)

The second guiding principle for LEAN is to “define the value-stream by flowcharting the process.” (Pesch, 2016)  According to the I - Six Sigma dictionary, “A value stream is all the steps (both value-added and non-value-added) in a process that the customer is willing to pay for in order to bring a product or service through the main flows essential to producing that product or service.” (Stroud)  The participants in a Kaizen event would often make use of Spaghetti diagrams to track distances traveled by people or product.  After studying the process, it is often possible to reduce the distance travelled thereby eliminating waste.

Finally, LEAN is guided by the principle of eliminating waste.  Hirsh’s commitment to LEAN principles is exemplified by the use of DOWNTIME throughout their Kaizen meetings as well as carried over into daily practices.  A prime yet simple example is the elimination of ‘standard’ ordering practices of paper for slot machines.  When the economy crashed, there were not as many people using the machines so fewer payout slips were produced.  The ordering of paper went unchanged even when use went down resulting in a 6 month supply of paper on hand.  Recognizing the situation and reducing (I) inventory helped to eliminate waste.

The guiding principles of LEAN act as a general outline for a business to keep their processes from generating waste while improving value-added service for their customer.  Caesar’s followed the 7 steps of LEAN Service of Implementation in Tunica and believed these processes could carry over to Metropolis.

In a short synopsis, they did this by:

1. Harrah’s in Tunica needed to distinguish themselves from the competition.  They identified the key process in the organization as getting customer satisfaction raised from a B to an A on evaluations while eliminating waste.
2. In order to analyze the situation and get everyone on board and involved they used Kaizen events that drew personnel from all departments.  Rather than assuming LEAN meant layoffs, employees soon found that their input was taken into consideration and valued.  Consequently, they were anxious to continue down the path management was encouraging.  In addition, customers were asked to complete evaluations so management could seek improvement in the areas that mattered most to the customer.
3. During the Kaizen events, the managers and staff followed the DOWNTIME outline looking to eliminate waste.  In doing so, the improvements in waste management often translated into value-added to the customer experience, for example, by making sure the correct rooms were assigned to the correct guests and their needs.
4. There were numerous changes for improvement that were identified through Kaizen events.  In an effort to make the largest impact they put waste improvements into quadrants and focused their initial attention directed at things that would have the greatest impact and were easiest to remove.
5. Identifying troubled areas is only half the battle.  Developing a solution and implementing the change is the next step in the battle for improvement.  In the case of Harrah’s, these solutions included but were not limited to labeling walls and putting minimum/maximum ordering lines in storage areas.  Using the ‘Five Whys’ technique to whittle down to the root cause of certain diagnosed waste examples to find the best solution.  ‘Five Whys’ can best be described as ask Why 5 (or more) times in order to force finding the root cause of waste.  They used the ‘Five Whys’, for example, to recognize that following factory recommended preventive maintenance would eliminate hours of polishing already clean silverware. Finally, it is imperative that all solutions have a measurable effect and goal for improvement.  Without assessment there is no way to know if the solution is working.
6. Once a problem is identified and a solution is implemented, measured, and confirmed as working it must be memorialized and made permanent.  This was done at Tunica with great effort from the human resources department.  With their help and the use of key performance indicators (KPIs), Harrah’s was able to sustain the changes desired rather than revert back to their old ways of doing things.
7. Ultimately, LEAN seeks continuous improvement.  Even after areas have been identified for improvement, solutions have been implemented, measured, memorialized, and sustained, this does not mean one should relax and assume the work is done.  Now you should start all over again to find the newest sets of problems that present themselves as the biggest areas ripe for remedy.

There are numerous tools available in the LEAN process.  While some have been touched upon, we would be remiss if we did not fully explain or clarify what these tools are and how these tools were implemented.