Gary Loveman and Harrah’s Entertainment

October 29, 2009

The first thing that really caught my eye about this case was former CEO Phil Satre’s willingness to break the usual mold used by gaming companies by reaching out and hiring a business professor from Harvard Business School to serve as COO. Although the discussion of this case briefly touches on the fact that a number of people within the Harrah’s corporation were skeptical of this hire, I would imagine that this was a far bigger problem then the case discussion lets on. I am sure there was a lot of hostility towards Gary Loveman from those who were passed over for the COO job and a lot of skepticism from the remainder of the organization given that Loveman only had academic experience, had no gaming experience, and was an organizational outsider.

Even though Gary Loveman had previously done some consulting work for Harrah’s, Satre really took a big gamble here. If Loveman had flopped it probably would have cost Satre his job, given that he brought in an untested academic with no gaming experience to be his COO. I really like that Satre was willing to take that risk—he wanted to shake things up and he did so in a big way. And, as the case details, it really paid off, as Harrah’s thrived in Loveman’s tenure as COO, which ultimately resulted in Loveman’s promotion to CEO once Satre stepped aside from that position.

For Satre, I think the key here is that he took the right risk. Of course you do not want your CEO making crazy decisions on a whim, as that can really hurt the company. And, after the meltdown we have seen in the financial sector, I would imagine that it is harder for CEO’s to justify making risky decisions and I suppose in today’s economic climate, Satre might not have been able to pull this hire off. But here, Satre had a person he really believed in who had some experience dealing with Harrah’s and he decided that the risk of bringing in an untrained outsider was worth the potential pitfalls.

Now that Loveman has completed his transformation of the organization, and done so with a lot of success, his challenge in his new role as CEO is to find a way for the company to continue to grow without losing any of the elements that helped the company experience success during Loveman’s tenure as COO. As the case file notes, there have been some locations where growth has stagnated, and thus it seems like some of these properties have reached their maximum potential. So, with regard to the existing properties, Loveman will need to identify what properties still have potential for growth and make sure steps are taken to help these properties reach their full potential. It will also be important, however, to make sure that those properties that are topped out are maintained and kept fresh, so that the company does not start losing business at those properties.

Outside of promoting growth within the organization’s existing properties, Loveman will also have to decide if, when, and how he wants to expand the number of properties in the companies’ portfolio. There are two ways to achieve this. One way is to build new properties in both existing markets that the company feels can support additional properties and to build new properties in currently unserved markets. The other is to expand by acquiring competitors and taking some or all of their properties into the companies’ portfolio. Obviously the later option is somewhat easier, in that the properties are already up and running and ready to go. But, even if they choose that option, it seems likely that Harrah’s will need to expand into additional markets outside of those that the company—and any competitors it acquires—currently serve in order to branch out and reach new customers. With that in mind, Loveman will need to develop strategies for both methods of expansion and work to ensure that, as the company grows, it does not lose sight of the goals and competitive advantages it developed in Loveman’s tenure as COO.

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