OOOOO GIoGhana ? 4:06 PM 'Y 'r Ritz-Carlton CASE STUDY.pdf Done QUALITY IN PRACTICE-SERVICE QUALITY AT THE RITZ-CARLTON HOTEL COMPANY, L.L.C35 Source: Adapted from the Malcom Baldridge National Quality Award Application Summaries of the Ritz-Carlton Hotel Company, L.L.C. Cheri Henderson, "Putting on the Ritz," TQM Magazine 2, no. 5 (November-December 1992), 292-296 Caesar Ritz defined the concept of a luxury hotel in the 18905. In 1992, The Ritz-Carlton Hotel Company, LLC. became the first hospitality organization to receive the Malcolm Baldrige National Quality Award; in 1999 they became the second company to win the award a second time, a testament to their continuous journey of improvement. The hotel industry is a very competitive business, one in which consumers place great emphases on reliability, timely delivery, and value. The Ritz-Carlton focuses on the principal concerns of its main customers and strives to provide them with highly personalized, caring service. Attention to employee performance and information technology are two of the company's many strengths that helped it to achieve superior quality. The Ritz-Carlton operates from an easy-to-understand definition of service quality that is aggressively communicated and internalized at all levels of the organization. Its Three Steps of Service, Motto, Employee Promise, Credo, and Service Values-collectively known as the Gold Standards-are shown in Figure 2.2, and instilled in all I employees through extensive training approaches. They allow employees to think and act independently with innovation for both the benefit of the customer and the company. Figure 2.2 The Ritz-Carlton Three Steps of Service, Motto, and Credo THE RITZ-CARLTO CREDO The Ritz-Carlton Hotel is a place where the THREE STEPS "We Are genuine ca re and CF SERVlCE comfort of our guests is 1 Ladies and our highest mission. We pledge to provide the Gentlemen finest personal service and facilities for our Serving guests who will always 2 enjoy a warm, relaxed Anticipation and compliance Ladies and yet refined ambience. with guest needs. The Ritz-Carlton 3 Gentlemen " experience enlivens the senses, instills well- being, and fulfills even the unexpressed wishes and needs of our guests. A warm and sincere greeting. Use the guest name, if and when possible. Fond farewell. Give them a warm good-bye and use their names, if and when possible. Source: Adapted from the Malcom Baldridge National Quality Award Application Summaries of the Ritz-Carlton Hotel Company, LLC, 1998 The Ritz-Carlton uses many sources of information to understand its customers. These include alliances with travel partners such as airlines and credit card companies; focus groups and customer satisfaction results; complaints, claims, and feedback from the sales force; customer interviews; travel industry publications and studies; and even special psychological studies to understand what customers mean, not what they say, and how to appeal to the customer in the language they most understand. A formal strategic planning process sets business directions to achieve the company's long-term vision: "To Be the Premier Worldwide Provider of Luxury Travel and Hospitality Products and Services." Upper managers at the corporate and hotel level conduct monthly performance reviews of the strategic plan, focusing on key indicators that reflect employee"000 GIoGhana '3' 4:06 PM 'Y SU"! Ritz-Carlton CASE STUDYpdf Done and customer satisfaction results; complaints, claims, and feedback from the sales force; customer interviews; travel industry publications and studies; and even special psychological studies to understand what customers mean, not what they say, and how to appeal to the customer in the language they most understand. A formal strategic planning process sets business directions to achieve the company's long-term vision: "To Be the Premier Worldwide Provider of Luxury Travel and Hospitality Products and Services." Upper managers at the corporate and hotel level conduct monthly performance reviews of the strategic plan, focusing on key indicators that reflect employee pride and joy, customer loyalty, financial performance, and process performance. Quarterly reviews focus on opportunities for improvement and innovation. A variety of comparative data on competitors and other world-class organizations is used to evaluate and improve their practices. For example, data revealed that front desk turnover was higher than usual. The company found out that certain airlines were paying higher wages and attracting their employees. The Ritz-Carlton reevaluated its compensation policy to match the airlines and actually reduced its total costs by eliminating a supervisor who was required to constantly monitor new employees. The Ritz-Carlton gathers and uses customer satisfaction and quality-related data on a daily basis. Information systems involve every employee and provide critical, responsive data on guest preferences, quantity of error-free products and services, and opportunities for quality improvement. They track a set of service quality indicators (SQI), shown in Figure 2.3, which represent the 12 most serious defects that can occur during regular operations. Each day an index is computed and disseminated to the workforce and reviewed by hotel managers. Figure 2.3 Ritz-Carlton Service Quality Indicators SQl Defects Points 1. Missing Guest Preferences 10 2. Unresolved Difficulties SO 3. inadequate Guestroom Housekeeping 1 4. Abandoned Reservation Calls 5 5. Guestroom Changes 5 6. Inoperable Guestroom Equipment 5 7. Unready Guestroom 10 8. Inappropriate Hotel Appearance 5 9. Meeting Event Difficulties 5 10. Inadequate Food/Beverage 1 11.Missing/Damaged Guest Property/Accidents SO 12. Invoice Adjustment 3 RITZ-CARLTON is a registered trademark of The Ritz-Carlton Hotel Company, LLC. Source: Adapted from the Malcolm Baldridge National Quality Award Application Summaries of the Ritz-Carlton Hotel Company, LLC, 1999. Each production and support process is assigned an "executive owner" at the corporate office and a "working owner" at the hotel level, who are responsible for the development and improvement of these processes. They have the authority to define the measurements and determine the resources needed to manage these processes. The "Green Book," a handbook for employees, describes a nine-step quality improvement process to guide the design, control, and improvement of all processes, and is emphasized during new employee training and continual development. The Ritz-Carlton even has a process to overcome cultural resistance to change: stress the importance of the change, express confidence that the change can be made, provide a reason why people should make the change as a group, and allow time to find an accommodation to the change. -I-I I I I f f-I-I I'- In In I I- l ii I-"COO GIoGhana '3 4:06 PM 'Y SU"! Ritz-Carlton CASE STUDY.pdf Done v. v- . ' - 10. Inadequate Food/Beverage 11.Missing/Damaged Guest Property/Accidents 50 12. Invoice Adjustment 3 RITZ-CARLTON is a registered trademark of The Ritz-Carlton Hotel Company, LLC. Source: Adapted from the Malcolm Baldridge National Quality Award Application Summaries of the Ritz-Carlton Hotel Company, LLC, 1999. Each production and support process is assigned an "executive owner" at the corporate office and a "working owner" at the hotel level, who are responsible for the development and improvement of these processes. They have the authority to define the measurements and determine the resources needed to manage these processes. The "Green Book," a handbook for employees, describes a nine-step quality improvement process to guide the design, control, and improvement of all processes, and is emphasized during new employee training and continual development. The Ritz-Carlton even has a process to overcome cultural resistance to change: stress the importance of the change, express confidence that the change can be made, provide a reason why people should make the change as a group, and allow time to find an accommodation to the change. These examples show only a few of The Ritz- Carlton's quality practices and the results have been impressive. At the time of receiving its second Baldrige Award, overall "top box" customer satisfaction (using a scale of 1 to 5, with the "top box" being a 5) was 70 percent against 52 percent for its foremost competitor. Employee satisfaction on issues of decision- making authority, teamwork, communication, and empowerment exceeded service company norms by a significant margin. The time to process a new hire from walk-in to job offer dropped from 21 days to 1 day in three years. Total revenue per hour worked showed a steady upward trend, and pretax return on investment improved from 5.3 percent in 1995 to 12.9 percent in 1999. One lesson the hotel learned is not to underestimate the value of even one idea or quality improvement effort. Key Issues for Discussion 1. What value does a focus on the Gold Standards have for The Ritz-Carlton? 2. What must a company do to reduce job offer processing times so dramatically? 3. How does information play a central role in everything that The Ritz-Carlton does