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Malcolm
Baldrige National Quality Award
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The only two-time recipient of the Malcolm Baldrige National Quality Award in the service category, The Ritz-Carlton Hotel Company manages 36 luxury hotels in North America, Europe, Asia, Australia, the Middle East, Africa, and the Caribbean. All have received four- or five-star ratings from the Mobil Travel Guide and diamond ratings from the American Automobile Association. The Ritz-Carlton competes against nearly 10 hotel groups in the luxury and upscale,
deluxe categories in the industry. Sales totaled almost $1.5
billion in 1998, with services provided to meeting and event planners
accounting for 40 percent of the total. Independent business and
leisure travelers constitute the next largest customer More than 85 percent of the companys 17,000 employeesknown
as The Ladies and Gentlemen of The Ritz-Carltonare
front-line workers in hotels. Through extensive training programs
and by offering opportunities for professional development, the company
encourages personnel to advance in the organization. Ritz-Carlton
President and Chief Operating Officer Horst Schulze began his career
in the hospitality industry as a waiters apprentice at a hotel
in Europe.
To be the Premier Provider ...Winning the 1992 Baldrige Award was both acknowledgment that Ritz-Carlton was an exemplary performer in the pursuit of excellence and an impetus for further improvement. Company management raised the threshold throughout the organization. Goals for customer satisfaction were raised to the top of the box. Earning ratings of very or extremely satisfied became a top priority as well as a key element of The Ritz-Carlton strategy to achieve 100 percent customer loyalty. In its operations, the company set the target of defect-free experiences for guests, implementing a measurement system to chart progress toward elimination of all customer problems, no matter how minor. Management took actions to realize other major opportunities for improvement. It revamped its strategic planning process to make it more systematic, and it refined its total quality management system, with the aim of achieving fuller and deeper integration into the organization. One output of this reassessment is the Greenbook. Now in its second edition, the Greenbook is The Ritz-Carlton handbook of quality processes and tools, a nearly constant reference that is distributed to all employees. Efforts to reduce employee turnover and to address employee morale issueschallenges faced by the entire hotel industryalso were undertaken. For example, hiring selection processes were refined and streamlined, and a new initiativePride and Joygave employees a larger role in the design of their jobs. Turnover rates have declined nine years in a row and levels of employee satisfaction are trending upward. Pyramid ConceptTo help set a clear direction for continuous improvement and to align actions at all business and operational levels, The Ritz-Carlton has developed its pyramid concept. Positioned at the top is the companys mission: To be the premier worldwide provider of luxury travel and hospitality products and services. Succeeding levels consist of The Ritz-Carlton 10-year mission (product and profit dominance), five-year mission (broken down into 14 vital few objectives), tactics for improving key processes, and strategies and action plans for sharpening customer and market focus. These tiers are underlain by the com-panys total quality management system and methods. Finally, The Ritz-Carlton values and philosophy make up the base of the pyramid, serving as the foundation for all continuous improvement efforts. The company goes to great lengths to instill and reinforce the philosophy and values in all employees. Everyone receives a wallet-sized copy of the Gold Standards, which consist of the companys Motto, Credo, Employee Promise, Three Steps of Service, and The Ritz-Carlton Basicsessentially a listing of performance expectations and the protocol for interacting with customers and responding to their needs. These are reinforced in training (which totals 250 hours for first-year front-line employees), in the daily five- to 10-minute briefing at the start of every shift, and through the companys reward and recognition system. A new pyramid is developed every year during strategic planning. To set the stage, an extensive macro environment analysis is performed and the results are distributed to senior leaders well before the first strategic planning session. The analysis considers factors ranging from the world economic outlook and global supply of hotel rooms to actions of key competitors and from indicators of customer and employee satisfaction to supplier relations. A key output of the planning process that follows are the vital few objectives for the next three years. These are organized into categories corresponding to strategic goals, such as 100 percent customer retention, or to organizational unit, such as new product development. Appropriate performance measures are identified for all objectives, and senior managers are assigned responsibility for assuring the quality and reliability of data for tracking them. Understanding Customers in DetailAt every level, The Ritz-Carlton is detail-oriented. Steps for all quality-improvement and problem-solving procedures are documented, methods of data collection and analysis are reviewed by third-party experts, and standards are established for all processes. Key processes also are dissected to identify points at which errors may occur. For example, to meet its goal of total elimination of problems, The Ritz-Carlton has determined that there are 970 potential instances for a problem to arise during inter-actions with overnight guests and 1,071 such instances during interactions with meeting event planners. To cultivate customer loyalty, The Ritz-Carlton has instituted an approach of customer customization, which relies on extensive data gathering and capitalizes on the capabilities of advanced information technology. Information gathered during various types of customer contacts, such as responses to service requests by overnight guests or post-event reviews conducted with meeting planners, are systematically entered into a database, which holds almost a million files. Accessible to all Ritz-Carlton hotels worldwide, the database enables hotel staff to anticipate needs of returning guests and to initiate steps that will help to ensure a high-quality experience. This attention to detail and the companys commitment to continuous improvement is delivering benefits. For example, in 1998, more than 80 percent of meeting planners reported that they were extremely satisfied with their overall experienceup from fewer than 70 percent a year earlierand 99 percent said they were satisfied. Among overnight guests questioned in an independent survey, nearly 75 percent reported extreme satisfaction with their overall experience at The Ritz-Carlton, as compared with fewer than 70 percent for the nearest competitors guests. Financial performance also is trending upward. Total fees; earnings
before income taxes, depreciation and amortization; and pre-tax return
on investment have nearly doubled since 1995, with Return on Investment
increasing from 5.3 percent in 1995 to 9.8 percent in 1998. Revenue
Per Available Room (the industrys measure of market share)
continues to grow, exceeding the industry average by more than 300
percent. For further information, contact: Last updated: 02/15/00 Contact:inquiries@nist.gov
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