In 1983, President and COO, Horst Schulze, decided upon a strategy to manage the Ritz Carlton in order to compete on quality. The strategy affected the entire organization, with significant differences in:
Defining traits of all company products defined in the company Credo
Translating the Credo into basic standards to clarify the responsibilities for employees
Personally train employees the new Ritz-Carlton Credo and basic standards (the Gold Standards)
Aggressively instilling a passion for excellence
Five years later, Schulze began using the Malcolm Baldridge National Quality Award criteria to develop a system of business excellence. This system used the Deming Wheel in order to achieve optimum performance levels throughout the organization. With these new policies in place, Schulze lead Ritz Carlton to the first recipient of the Malcolm Baldridge National Quality Award for Service.
The 1999 Ritz-Carlton application summary is as follows:
Criteria 1: Leadership
Plan There are seven specific decisions collectively made by Senior Leaders to set direction for business excellence:
10 year visionStrategy
5 year missionMethods
3 year objectiveFoundation
1 year tactic
The senior leaders formed the Gold Standards, which are comprised of the Credo, The Basics, Three Steps of Service, the Motto, and the Employee Promise. Together, the Gold Standards have the ability to empower employees to take initiative in thinking and acting with innovation and independence, for the overall benefit of not only the company, but the customers as well.
Do Specific actions by senior leaders in order to properly manage the new leadership approach are made up of three salient processes:
Ensuring each new hotels goods and services are characteristic of all other Ritz Carltons on opening day.
The results of seven specific decisions defined at the annual strategic planning process are arranged in a pyramid and distributed throughout the organization
The Gold Standards are reinforced daily in a myriad of ways.
Check Leadership effectiveness is evaluated on key questions of the Ritz-Carltons semiannual employee satisfaction results and also through audits on public responsibility.
Act Gaps in leadership effectiveness are addressed with development/training plans. For widespread deficiencies, the corporate human resource department develops and improves courses, processes, or facilities.
Criteria 2: Strategic Planning
Plan An extensive analysis is performed to understand the current state of the macro environment in which the Ritz-Carlton operates. Using the Macro-Environment Analysis, Senior Leaders confirm or make changes to the 10-year vision, 5-year mission, strategy, methods, and foundation. Discrepancies identified in the analysis are used to create the 3-year objectives.
Do Specific actions by Senior Leaders to deploy the 3-year objectives are as follows:
Develop production processes
Deploy support processes
Develop preliminary plans/budgets
Finalize the Ritz-Carlton pyramid plan and budgets
Reinforce the pyramid concept/plan/budgets
Communicate the pyramid concept to the employees
On-going daily lineup reinforcement
Evaluate/improve planning processes
Conduct monthly reviews of plans at all levels and collect necessary information for the next cycle
Check Upper management conducts monthly performance reviews of the strategic plan, focusing on pre-established performance measurements of the 3-year objectives as well as key processes. The information allows the Ritz-Carlton to make improvements and benchmarking comparisons.
Criteria 3: Customer and Market Focus
Plan Customer and market focus concentrates on the information needed for hotel development and operation. Needs include determination of market segments, identifying potential customers, relative priorities of customers, demand forecast, individual dissatisfaction of customers, widespread dissatisfaction of customers, competitive quality status, and opportunities for improving quality. Much of this information requires analysis and special studies.
Do Specific actions taken by the Ritz-Carlton Sales and Marketing Leaders to organize research conclusions include:
The Six Ps concept, which creates a vision of well-being from the purchase of Ritz-Carlton products: Problem, Product, Promises, Personal Advantage, Positioning, and Price/Value.
Operation of the CLASS database which keep track of all 800,000 customers and their preferences
A complaint resolution process
Standard performance measurements that are both forward-looking and reaction based
Check The effectiveness of their Customer and Market Focus is evaluated through daily, monthly, and annual reviews.
Act The daily and monthly reviews identify performance gaps to be corrected. The extensive Macro-Environment Analysis confirms or creates changes in marketing strategy, objectives, and plans.
Criteria 4: Information and Analysis
Plan Two types of measurements are used at the Ritz-Carlton: organizational measurements for upper managers, and operational measurements for planning, assessing and improving daily operations. Three types of comparative data result from the measurements: comparisons of the industry and biggest competitors, benchmarks outside the hotel industry, and benchmarks inside the company.
Do Specific actions taken by Senior Leaders to deploy the information and analysis results are based on the concept of individual process owners. The Ritz-Carlton assigns individual owners to each metric associated with the 3-year objectives to make sure that performance measurements are current with the business needs.
Check The Ritz-Carlton relies on their employees to ensure data and information reliability. At the corporate level the company assigns individual process owners to assure data can withstand scrutiny and provide background information. They also retain third-party specialists to provide independent reviews of information analysis and processes.
Act Whenever process owners or consulting specialists identify a change of plan is needed, the plans are rewritten, rebudgeted and reapproved. Employees identify and implement the improvements.
Criteria 5: Human Resource Focus
Plan Senior Leaders decided to increase both the meaning and satisfaction employees gain from their work. This approach consists of three basic components:
Employees know what they are supposed to do
Employees know how well they are doing
Employees have the power to make changes to their own personal conduct and the processes that are under their authority
Do There are many actions taken to deploy Ritz-Carltons approach, but the most significant activities consist of the Quality Selection Process and employee education, training, and development.
Check Results of the selection, training and development of employees are checked at key stages of progression:
The Quality Selection Process which measures desirable, spontaneous behavior of potential employees
Employees receive evaluation and debriefing after 21 days and 365 days of employment
Employees are subject to examination/audit at the end of their initial training period
Evaluation of annual performance appraisal information
Analysis of well- being, satisfaction and motivation through employee surveys
Act Improvement activities in Human Resources rely on internal audits, site visits by Senior Human Resources Leaders, and analysis of employee survey data.
Criteria 6: Process Management
Plan Through market research, the Ritz-Carlton has identified key production processes. In addition, they have conducted formal discussions between support and operations employees and internal and external customers to identify administrative and support processes, which impact their products and the companys mission.
Do Specific actions taken to deploy the annual process management approach flow from their strategic planning process down through every job level and category in the company. These actions include:
Assign process owners to each production and support process
Distribute a handbook to all employees to guide the design, control, and improvement of all processes
Design key processes for new hotels based on market research, facility design, and operating conditions
Check Although they need to control sensory characteristics of the products they produce, the Ritz-Carlton tries to put it in numbers into their systems of process measurements.
Act Permanent cross-functional teams at all levels use After Operations Measures and customer survey inputs to improve key processes. Improvements can happen in two ways: major changes that require funding, resources and project management, or incremental day-to-day improvements. Improvements are managed in two main ways: traditional hierarchy or executive process owners.
Criteria 7: Business Results
7.1Customer Focused Results
Statistically, customer and employee satisfaction data comparisons are considerably different from the competition at the 95% confidence level. Surveys are administered and produced by objective and independent outside third-party research consultants, and analyzed against world class and Baldridge winning companies.
Externally, the Ritz-Carlton uses J.D. Power and Associates to measure overall customer satisfaction versus their foremost competitor. Individual guest satisfaction is also measured both internally and externally using a variety of surveys.
7.2Financial and Market Results
The Ritz-Carltons measures of financial performance fall into a number of different categories including earnings before income taxes, depreciation and amortization, and return on investment. They measure administrative costs as a percentage of total fees, profit and revenue, and generate an analysis of the percentage of gross profit versus their main competitors.
7.3Human Resource Results
Ritz-Carltons employee well-being and satisfaction are measured through their Employee Satisfaction Survey. Responses are analyzed and compared to service company norms.
Turnover has decreased from 77% in 1989 to 30% in 2000. The industry average is currently just over 50% (RCHC/Kaznova Consultants). Positive trends are a result of increasingly improved selection and training processes as well as drivers of employee satisfaction.
7.4Supplier and Partner Results
The Ritz-Carlton ensures that performance requirements of their suppliers are met through a thorough Supplier Compliance and Quality survey that measures key aspects of supplier quality. Purchasing personnel at each hotel fill out the survey every six months and rate specific issues, for example, fit for use, accuracy and service, etc. Suppliers who achieve an 80% or better overall rating on all attributes meet Ritz-Carltons quality requirements.
7.5Organizational Effectiveness Results
Ritz-Carltons C.A.R.E. program of systematic preventive maintenance has kept their property and equipment at world-class levels at reduced costs. This is in line with their goal of pursuing a defect-free environment.
With unemployment at a low and significant competition for skilled workers, the Ritz-Carlton embarked on a major project to improve the cycle time from when a potential new-hire walks in the door and a job offer is tendered. Using scientific quality approaches, the Ritz-Carlton has improved cycle time from 21 days in 1996 to just 1 day in 1999.