CaesarsCasinos.pdf

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.

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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.)

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– 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
ed approximately $10,000 worth of slot paper, regardless of current inventory levels. This 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.

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– 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 solu-
tions, 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.

• Kaizen Day 2
During the second morning, participants
mapped the work processes targeted for im-
provement. Team members engaged in what
was called a gemba3 walk, in which they went
to where the work was done, made notes on
what they individually saw, and gathered data
about each process step. Then they jointly
created a large, wall-display value stream map
of the process using sticky notes and simple
symbols (see Exhibit 1 for an example).

The afternoon of Day 2 was devoted to a
waste walk. Armed with a sheet that listed the
types of waste and using the DOWNTIME
rubric, each participant observed a segment
of the process and recorded every waste he or
she identified. In some cases, team members
counted how often a particular waste (e.g.,
walking to retrieve a forgotten item) occurred
and timed the duration. This information
helped teams to understand the effects of
the waste on the business. After completing
their observations, team members met to
share their waste discoveries, recording each
waste on a separate sticky note. A typical kaizen team identified between 60 and 80 points of waste in the
target process.

As part of the waste walk, a team member equipped with a copy of the area layout would follow a specific
person or product, drawing a line from start to finish every time the person or product moved to a new loca-
tion. The result, called a spaghetti diagram, often provided compelling evidence of the motion and transpor-
tation waste inherent in the current way work was done. Exhibit 2 shows the spaghetti diagram of sandwich
production developed as part of a kaizen event focusing on kitchen operations.

In the afternoon of Day 2, team members categorized wastes by moving each pink sticky note into the appro-
priate quadrant on a wall-mounted matrix (see Exhibit 3). Specifically, the team determined whether a waste
would be easy or hard to remove and whether removing the waste would have a large or small effect on (1)

3 Gemba (also translated as genba) is the Japanese term for “actual place” and is often used to refer to the location where
work occurs.

Exhibit 1. Value Stream Map of Hotel Operations

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safety, (2) quality, (3) delivery, (4) inventory,
or (5) productivity and cost. These were the
five key dimensions on which all areas were
evaluated.

Wastes that appeared in the top left (easy to
remove, large impact) quadrant (circled) were
the first targets of opportunity for the remain-
ing days of the kaizen event.

At the close of Day 2, the kaizen team pre-
sented the work it had done so far to the
property’s executives. The team shared its
value stream map, waste-prioritization matrix,
and other analyses. This meeting had three
goals. First, the exchange of information at
the meeting helped ensure that senior lead-
ers recognized the goal of the kaizen event,
understood the analyses the team had per-
formed, and supported the direction the team
was headed. Second, the checkpoint meeting
provided an opportunity to seek senior execu-
tives’ assistance in removing barriers the team
anticipated (e.g., the need to purchase equip-
ment, or a request for help in rearranging a
workspace). Third, the department manager’s
involvement in the kaizen team’s presentation
helped ensure his or her commitment to the
changes the team was developing.

• Kaizen Day 3
On Day 3, the team identified the root cause
of each waste in the easy-to-remove, large
impact quadrant of the matrix generated in
Day 2. In seeking out root causes, kaizen
teams relied heavily on the Five Whys lean
tool. This technique involves asking why five
(or more) times whenever a problem or waste
is encountered. For example, a team observed
that buffet attendants routinely polished clean
silverware. When queried, the area’s supervi-
sor noted that over a typical 24-hour period,
about four hours of employee time was spent
polishing clean silverware. Applying the Five
Whys to this waste of motion, the team asked
and answered the following series of questions:

• Why are attendants spending four hours
a day polishing clean silverware?
– Because the silverware has spots that create an unacceptable presentation on the dining table.

• Why does the silverware have spots on it?
– Because the silverware comes out of the dishwasher with spots on it.

• Why does the dishwasher leave spots on the silverware?
– The dishwasher doesn’t hold a consistent temperature during one of the phases of the cleaning cycle.

Exhibit 2. Spaghetti Diagram of Sandwich Production

Exhibit 3. Waste Prioritization Matrix

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• Why is one phase of the cleaning cycle not holding a consistent temperature?
– One portion of the current preventive maintenance protocol is not consistent with what the manufacturer

suggests in the dishwasher’s operating manual.
• How can we remedy the situation?

– Revise the preventive maintenance protocol to make it consistent with the manufacturer’s guidelines.

Based on this analysis, team members revised and adopted new preventive maintenance practices, and con-
tinued to evolve them over time.

• Kaizen Day 4
Day 4 was devoted to try-storming—proposing and testing possible remedies to root causes of problems
identified the prior day. For example, the team investigating the waste of motion in polishing clean silver-
ware agreed to commit to better pre-wash procedures, and to institute routine preventive maintenance to
clear obstructions in the dishwasher tubing before they could affect the rinse water temperature. Preventive
maintenance design and scheduling were among the lean solutions frequently called upon to remove waste
from processes during kaizen events.

In another example, the team examining
kitchen processes try-stormed options for
arranging kitchen equipment and supplies
to reduce the time and motion involved in
preparing sandwiches. Exhibit 4 shows the
spaghetti diagram of sandwich production
in the revised kitchen layout (as contrasted
with Exhibit 2). Locating together the items
needed for sandwich production (an example
of work-cell creation) vastly streamlined the
time and motion required.

Another LEAN tool used by almost every
team in the try-storming phase was 5S, a term
referring to principles for creating a visual
work environment that is easy to understand,
execute, and maintain. The concept was
originally drawn from five Japanese words:
seiri, seiton, seiso, seiketsu, and shitsuke. These
have been translated into numerous S-words
in languages around the world. In English, the 5S are typically expressed as sort, set in , shine, standard-
ize, and sustain.

1. Sort: “If in doubt, throw it out” is the phrase that best describes this first S. Sift through everything that
has accumulated in the workplace and identify what is needed. Eliminate unnecessary or out-of-date
items.

2. Set in Order: “A place for everything and everything in its place” describes the set-in- concept. As-
sign essential items to specific locations and clearly mark these locations. The objective is for anyone to
be able to find anything at any time quickly, and for it to be obvious when things are not in their proper
place.

3. Shine: Clean and inspect the workplace. After sorting and setting in , houseclean thoroughly to
ensure that everything is clean, neat, and functioning properly.

4. Standardize: Standardize means to create and enforce policies and procedures that make 5S a daily practice,
not a one-time activity. This typically entails assigning responsibilities and putting in place policies such
as a daily five-minute shine—a brief period each day devoted to cleaning and ing the workplace.

5. Sustain: Sustain means to institutionalize the above 4S’s throughout the entire organization so that 5S
develops deep roots.4 Training, communication, ongoing measurement, and promotion of 5S are essential
building blocks of sustain.

4 P. Dennis, Lean Production Simplified (New York: Productivity Press, 2007, p. 35).

Exhibit 4. Spaghetti Diagram of Sandwich Production
after Try-Storming

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In applying 5S at Tunica, teams began by removing everything from the area under study and placing each
item into one of three piles: (1) items that were definitely needed and used, (2) items about which the team
was not sure of the need, and (3) items that were definitely not needed. Items in the not-needed pile were
discarded or repurposed. Items in the definitely needed pile were set in —placed in a designated area.
Next, the team turned to the not-sure-of-the-need pile. Having just set in the definitely needed items,
teams were able to take a fresh look at items in the not-sure-of-the-need pile. Teams often concluded that
much of the not-sure pile could be discarded or repurposed.

A kaizen event in the buffet kitchen applied 5S to the dry-goods storage area, where inventory was not sys-
tematically organized (see Exhibit 5, left side). Retrieving a specific item might require a lengthy search, and
items, once located, could potentially have passed their expiration dates. Further, duplicate items might be
ed if the on-hand item could not be located quickly.

The kaizen team studying the dry-goods storage area discarded $8,000 worth of unused inventory, established
dedicated storage locations for the items that remained, marked the maximum inventory levels with tape on
the wall, and used eye-level labels with pictures to show what went where (see Exhibit 5, right side). The effort
simplified ing and increased the speed with which items could be retrieved for use in serving customers.
To address the inventory challenge of slot paper described earlier, the kaizen team dedicated a lined-off space
in the warehouse for the boxes of slot paper and created a visual two-bin system. Two stacks of slot paper, each
of which represented a two-week supply, were located side-by-side. Team members placed a strip of tape on the
wall indicating the maximum height of the stacked boxes of paper. They added clear signage that reminded
warehouse personnel to withdraw boxes from only one stack at a time until it was depleted. Depletion of the
first stack triggered an timed to arrive
before the second stack ran out (see Exhibit 6).
This system eliminated unnecessary s and
reduced the annual inventory investment by
$60,000. And, because warehouse workers had
been part of the kaizen team that developed
this solution, they readily embraced the new
work procedures.

Through the application of simple tools, such
as 5S, a kaizen event typically eliminated
anywhere between 25%-90% of the waste
observations. This was a powerfully motivating
and rewarding exercise for employees who were
able to see that they could immediately remove
obstacles and improve frustrating aspects of
their work through the kaizen process.

Exhibit 5. Before and After 5S in Main Kitchen Dry-Goods Storage

Exhibit 6. 5S Two-Bin System

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• Kaizen Day 5
On the morning of the last day of a kaizen week, the team presented its work to the property executive team
and managers. Team members shared their value stream maps, waste analysis and try-stormed solutions, and
described the follow-on improvements they planned to make, but could not complete, in the five-day kaizen
event window. These action items identified, but not yet implemented, were captured in the area’s Kaizen
Newspaper, which was posted in the work area and became part of the daily-management metrics board (see
Exhibit 9). The presentation on the last day was informative for senior leaders, and it also allowed them to
recognize kaizen team members for their hard work and reinforce the cultural shift taking place.

Post-Kaizen Pillars

The week-long kaizen events pro-
vided the foundation for creating a
LEAN culture. Solidifying the gains
and maintaining momentum to truly
transform the organization required
more than these week-long events,
however. Caesars Tunica’s House of
LEAN (see Exhibit 7) relied on three
post-kaizen pillars: standard work, key
performance indicators, and a focus
on daily problem solving reinforced
through gemba walks.

• Standard Work
Every kaizen event resulted in

new ways of performing routine
work activities, and each new work
process was documented with easy-
to-follow instructions that included
pictures and listed the tools required (see Exhibit 8). This standard work became the prescribed and repeatable
way of performing the task.

• Key Performance Indicators: The Daily-Management Metrics Board
Measurement played an essential role in keeping areas accountable for maintaining and extending the

improvements made during the kaizen event. “You get what you measure,” as the management adage holds.
After each kaizen event, employees in the work area developed a set of key performance indicators (KPIs)
that were consistent with the company’s overall operating …