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 diversified 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 operations. (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 narrower view that might suggest downsizing.
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 included 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 acronym 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.
- – 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 allow you to better serve customers?” Prior to the introduction of LEAN methods, the majority of tactical process changes occurred as a result of a top-down approach. Although some of these top-down solutions produced improvement, they did not always achieve their highest potential. Without immediate feedback from the employees actually doing the work, managers could not fully appreciate delivery-system challenges. For example, employees in one area struggled to transport food carts across deep pile carpeting in corridors, resulting in relatively long transport times and employee fatigue. During a kaizen event, the employees who had experienced this performance obstacle greatly appreciated having their voices heard.
- – Transportation: This is the waste of resources, time, and effort involved in moving items and tracking their locations. Damage and non-value-added payroll expense are always a risk when items are transported, and transportation adds to process throughput time. Moving food, for example, does not add to its value. One kaizen team tracked the life of a beer and discovered that a beer could be put into storage in up to five different locations before being acquired by the beverage server for delivery to customers. Limiting transportation frees employees for higher-value work, and, in the hospitality industry, can also help protect product quality.
- – Inventory: Inventory waste is incurred when material on hand exceeds current demand. Excess inventory costs money, takes up space, can create a safety hazard, and becomes obsolete when customer requirements change. Inventory is, in essence, dead money—money has been spent on something that is doing nothing to create customer value. An examination of one of the Tunica warehouses revealed multiple pallets of boxes of paper used to print vouchers for customers cashing out from slot machines. Each month, a team ordered approximately $10,000 worth of slot paper, regardless of current inventory levels. This order level had historically enabled the property to have the right quantity of slot paper on site. However, as business levels declined for casinos in the Tunica region and slot volumes became more variable, a six-month supply of slot paper accumulated in the Caesars Tunica warehouse.
- – Motion: Any movement that does not add value to the product or service represents waste of motion. In a food-service area, bottles of water were stored in a large tub-like container of ice (rather than a refrigerator) to keep them cold. Servers incurred waste of motion every time they reached into the container, withdrew a cold bottle of water, grabbed napkins from a nearby dispenser, and dried off the bottle before placing it on a tray to deliver it to a customer.
- – Extra Processing: Extra processing occurs when unnecessary, non-value-adding work is performed. For years, as part of the property’s security protocol, a security guard used a metal-detecting wand to scan bags of trash coming out of the casino’s cash-counting room to ensure that coins were not being smuggled out. This practice continued after the casino eliminated all metal coins from operations. No one questioned the protocol to wand the trash because it was always done this way and was assumed to be a regulatory necessity.
D-O-W-N-T-I-M-E proved an effective analytical tool to help front-line personnel see the various types of waste in work processes. In addition, Day 1 training also introduced several LEAN tools. Participants learned about value stream mapping, spaghetti diagrams, 5S, Five Whys, one-piece flow processing, the pull discipline, and the basic problem-solving approach (i.e., define the problem, seek out root causes, identify potential solutions, test them, keep what works, repeat). With an understanding of these LEAN principles and tools, the teams were ready to improve their own processes. At the end of Day 1, each team agreed on the processes that would be the focus of the week’s kaizen improvement efforts. The selected processes presented the greatest opportunities to improve customer service and reduce waste.
