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 customers—that 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 Ritz-

Carlton 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. It’s 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 aren’t “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 Ritz-

Carlton, 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

problem—the 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

customer’s 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 Ritz-

Carlton. 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 doesn’t 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 management’s attention and a solution is

found. By eliminating internal complaints generated by employees, Ritz-

Carlton 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, Ritz-

Carlton 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 Team performance reviews
• Planning and improving work •
processes Coaching and training team
• Developing team goals and mission members
• Scheduling and payroll •
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 know-

how. 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. Why is it important for Ritz-Carlton to insist that employees not think of

themselves as servants, but rather as ladies and gentlemen?
2. In what ways does Ritz-Carlton engage in relationship marketing?
3. Is quality at Ritz-Carlton cost-effective? Even if it costs $2,000 an
incident?
4. Should Ritz-Carlton attempt to move toward the president's goal of 100
percent customer satisfaction? Why or why not?
5. 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?