CASE 8 THE RITZ-CARLTON: GOING FOR 100 PERCENT After Ritz-Carlton won the Malcolm Baldrige National Quality Award in 1992, many people within the company and in the rest of the hospitality industry asked, Where can Ritz-Carlton go from here? If you already give the best customer service, how can you improve? What can you do to build stronger relationships with customers? An ordinary firm might have hung the award on the wall and been content with its status, but not this company. Ritz-Carlton management knows that total quality management is an ongoing process. After all, the hotel chain was only satisfying 97 percent of its customersthat leaves 3 percent room for improvement. Perhaps this much improvement doesn't seem like a difficult task, but when you consider all the changes in employee recruiting and training, empowerment, and managerial planning that RitzCarlton had already made, you have to ask What's left to improve? To answer that question, you first need to know what total quality management processes Ritz Carlton already has in place. Total quality management has to permeate every level of an organization, from top management down to the lowest-level employee. Its not enough for managers to say that they believe in quality service; employees must be trained and motivated to provide quality service. How can a firm build a quality service orientation among employees? It starts with hiring the right employees. In the case of Ritz-Carlton, employees arent hired, they are selected. In an industry notorious for

low pay levels and high turnover, many competitors hire people with minimal skills and give them minimal training. The result is poor quality or inconsistent service, low employee morale, and high turnover. At the RitzCarlton, employees are carefully selected; for every new employee at an introductory orientation session, ten others applied. Once selected, each employee attends a two-day orientation to learn about the Ritz-Carlton corporate culture, followed by extensive on-the-job training that results in job certification. To ensure that employees are adequately trained, the Ritz-Carlton routinely tests more than 75 percent of its employees. Employees are tested on two front: (1) their mastery of skills associated with their particular employment and (2) their grasp of knowledge that will qualify them as quality engineers. Skills testing varies with the job: telephone operators might have their customer calls monitored to ensure that they adhere to standards such as answering the phone by three rings. Housekeepers might be asked about what to do if they encounter a floor spill. When an employee fails the skills test, a company trainer attempts to determine the cause of the problemthe teaching method, the employee's personal difficulty, or something else. The company expects 100 percent compliance with skills testing. If an employee cannot pass the test, then he or she may be assigned to another position before leaving the firm. To pass the quality engineer certification, employees must understand the company's TQM philosophy and credo. To reinforce this

knowledge, each Ritz-Carlton hotel has a daily lineup at which employees affirm their commitment to quality. In addition, employees discuss one of the company's twenty basic points of service. All employees must learn the company credo and the three steps of service. The Ritz-Carlton Credo states: The Ritz-Carlton Hotel is a place where the genuine care and comfort of our guests is our highest mission. We pledge to provide the finest personal service and facilities for our guests who will always enjoy a warm, relaxed yet refined ambiance. The Ritz-Carlton experience enlivens the senses, instills well-being, and fulfills even the unexpressed wishes and needs of our guests. The three steps of service are (1) a warm and sincere greeting, (2) anticipation and compliance with guest needs, and (3) a fond farewell, using the guest's name if possible. At the Ritz-Carlton, employees are not servants, they are ladies and gentlemen serving ladies and gentlemen. This necessitates changes in their demeanor and language. The appropriate way to greet customers is to say Good morning or good afternoon, not Hi, how's it going. The appropriate way to respond to a request is Certainly or My pleasure rather than Sure. According to Mary Anne Ollman-Brigis, corporate director of training at Ritz-Carlton, the purpose of all this training is to make employees feel more comfortable in their jobs, so that they will be more successful. We certify people to empower them to make decisions, she says. What sorts of decisions can employees make? They can handle any customer complaint on the spot and spend up to $2,000 doing so. And they

can demand the immediate assistance of other employees. Twenty minutes later, they should telephone the guest to make sure that the complaint was handled properly. In addition, once employees learn of a particular customers wants, such as foam pillows or desire for a particular newspaper, that information goes into a 240,000-person database. The customer will automatically get the desired service the next time he or she stays at a RitzCarlton. Does such employee empowerment pay? The answer is yes according to Patrick Mene, Vice President of Quality. He expresses this as the 1-10-100 rule: What costs a dollar to fix today will cost $10 to fix tomorrow and $100 to fix down-stream. Ritz-Carlton doesnt work just to solve customer problems, it works to avoid them in the first place. Any employee who spots a potential problem in service delivery brings this to managements attention and a solution is found. By eliminating internal complaints generated by employees, RitzCarlton avoids external complaints that might come from customers. Attention to quality extends beyond hotel staff. Top managers meet weekly to review measures of product and service quality, guest satisfaction, market growth and development, and other business indicators. From top management down, Ritz-Carlton's quality management is characterized by detailed planning. To ensure that quality standards are maintained, RitzCarlton collects daily reports from each of the 720 work areas in each of the 30 hotels it manages. It tracks measures such as annual guest room preventive-maintenance cycles, percentage of check-ins with no queuing,

time spent to achieve industry-best clean-room appearance, and time to service an occupied room. Ritz-Carlton responded to the What's left to improve? question in two ways. First, the company aimed at global recognition for its quality efforts. Second, it revolutionized global operations through the implementation of Self-Directed Work Teams (SDWTs). Progress toward the first goal occurred when the Ritz-Carlton, Cancun, won Mexico's National Quality Award, and other Ritz-Carlton hotels won the Australia State and National Customer Service Awards, Hawaii's State Quality Award, and Houston's City Quality Award. The Self-Directed Work Teams project got off the ground in Tysons Corner in 1993. It proved so successful that it was rolled out in the other 30 Ritz-Carlton Hotels. A SDWT is a group of employees responsible for a complete work process. Such teams are responsible for: Sharing various management or leadership functions Planning and improving work processes Developing team goals and mission Scheduling and payroll Team performance reviews Coaching and training team members Ordering and purchasing of supplies and maintenance of inventories SWDTs have two major benefits: They liberate and unleash the creative potential and entrepreneurial abilities of employees, and they free managers from the day-to-day operational aspects of a hotel or work area. As a result, employees are happier and more satisfied with their jobs and managers are

free to provide vision and direction rather than direct supervision. In the future, the Ritz-Carlton may be able to sell its service knowhow. Recently, United Airlines enlisted the help of the Ritz-Carlton to train flight attendants to cater to passengers in first class on international flights. Attendants learned to refine skills ranging from pouring champagne (grasp the well on the bottom of the bottle) to gracefully serving from a platter during turbulence (maintain your composure). More important than the skills training, however, may be instilling in employees the attitude that serving the customer is a pleasure. The president of the Ritz-Carlton chain has set a new goal of 100 percent customer satisfaction and a reduction in defects to just four in every million customer encounters. Eliminating virtually all problems, however, is a costly process that can reduce company profits, and some critics believe that Ritz-Carlton is not sensitive enough to its bottom line. For example, to improve customer satisfaction from 97 percent to 98 percent, some would say, is a marginal improvement that could require a great deal of expense and employee effort for a relatively low dollar return. Besides, how can any firm anticipate all possible problems and eliminate all complaints? Should it even try? Questions for Discussion for Discussionfor Discussion 1. 2. 3. Why is it important for Ritz-Carlton to insist that employees not think of themselves as servants, but rather as ladies and gentlemen? In what ways does Ritz-Carlton engage in relationship marketing? Is quality at Ritz-Carlton cost-effective? Even if it costs $2,000 an incident?

4. 5.

Should Ritz-Carlton attempt to move toward the president's goal of 100 percent customer satisfaction? Why or why not? How could the Ritz-Carlton credo and principles of customer service be applied to: (a) hair-care salons, (b) banks, (c) medical offices, (d) auto repair garages?