1999 Application Summary THE RITZ-CARLTON® HOTEL COMPANY, L. L. C. Copyright © 2000 by THE RITZ-CARLTON® HOTEL COMPANY, L. L. C. – All Rights Reserved THE RITZ-CARLTON® HOTEL COMPANY, L. L. C. at a Glance Products and Services: The Ritz-Carlton Hotel Company, L. L. C. develops and operates luxury hotels for others. The hotels are designed and identified to appeal to and suit the requirements of its principal customers who consist of: (1) Meeting Event Planners and (2) Independent Business and Leisure Travelers. President & COO: Horst Schulze Headquarters: 3414 Peachtree Road, N. E. Suite 300 Atlanta, Georgia 30326
Operations: One Central Reservations Office Seven International Sales Offices (ISO’s) 24 Hotels and Resorts in North America Two Hotels in Europe Eight Hotels and Resorts in Asia Two Hotels in Australia 30 Hotels under Development Customer Base: Over 800,000 Customers World-wide 1999 Revenue: $1. 5 Billion. A 40% increase over the previous five years. Employees: 17,000 World-wide, known as The Ladies and Gentlemen of The Ritz-Carlton History: Established in 1983, the former owner, W. B. Johnson Properties, acquired the exclusive North American rights to the Ritz-Carlton trademark, the foremost ame in luxury hotels. This status was largely due to the legendary Caesar Ritz who developed and operated two of the world’s best hotels in Paris and London. The hotels achieved such fame in the marketplace that they attained what is often referred to as “The Ritz Mystique”. In 1995, The Ritz-Carlton was jointly acquired by Marriott International Inc. to achieve their strategy of entering the luxury hotel segment of the industry; the takeover/merger occurred in 1997. Copyright © 2000 by THE RITZ-CARLTON® HOTEL COMPANY, L. L. C. – All Rights Reserved The Ritz-Carlton Hotel Company, L. L. C. 999 Application Summary Overview A History of Managing for Performance Excellence in the Hotel Industry Most hotels remained profitable despite these quality deficiencies because competitors had similar problems. Previously, in tiny hotels and inns, the innkeeper directed activities in the organization personally, including “managing for quality”. As hotels grew in size, the volume of activity outgrew the capacity of the innkeeper to manage by personal direction – it became necessary to delegate. Ritz-Carlton Returns to the Fundamentals: Upper Management Participation Then came 1983 and Horst Schulze.
More Summary of Devil at My Heels
The pace quickened with a lengthy procession of new Ritz-Carlton Hotels under development. Faced with this challenge, Horst Schulze and his team decided to personally take charge of managing for quality because they realized managing for quality could not be delegated! Apprentices were trained in the craft and qualified by examination to become craftsmen. The innkeeper – the master – then delegated much of the managing for quality to the craftsmen, subject to inspection and audit by the master. Many of our standards go back 100 years to this era of Caesar Ritz and the legendary Chef August Escoffier.
The upper management participation of Horst Schulze and his team ranged across a broad spectrum, but most significant activities consisted of: As we entered the 20th century, the size of a hotel and its organization sharply increased. The resulting large hotels required functional departments. The innkeeper – now a general manager – delegated to each functional department head the responsibility for quality, for performing the function correctly. • Defining the traits of all company products which are set out in The Credo. For a full explanation of The Credo, see Figure 1 on page 2. With the emergence and growth of technology, hotel roducts and processes became increasingly complex. To deal with these new complexities the hotel industry adopted the principle of separating planning from doing. Planning of the various departments was delegated to division and department heads (e. g. Food & Beverage managers, Rooms Executives, Purchasing Directors, etc. ). This left the job of executing the plans to the first-line supervisors and the workforce. The separation of planning from execution had four major consequences. • Translating The Credo into basic standards to clarify the quality responsibilities for our Ladies and Gentlemen; the ost important of which include: (1) anticipating the wishes and needs of the guests (2) resolving their problems and (3) genuinely caring conduct towards guests and each other. 1. A factory concept emerged in which people were assigned one task rather than a single craftsman performing the entire sequence of tasks. In this factory approach, if task #11 was causing a problem for task #24, it wasn’t identified until it reached the customer, and even then the problem likely continued. 2. A dramatic rise in productivity. 3. The segregation of divisions and departments. 4. A further distancing of upper managers from the job of anaging for quality. • Aggressively instilling a passion for excellence. • Personally training the Ladies and Gentlemen of a new Ritz-Carlton on The Credo and Basic Standards, commonly referred to as The Gold Standards, which are shown on page 2 as Figure 1. Another Major Change, A Comprehensive Structure By 1989 Horst Schulze realized that a more comprehensive structure was necessary for the Ritz-Carlton to optimize its performance. He selected the Malcolm Baldrige National Quality Award Criteria. Through the use of this assessment tool and the resulting feedback reports,
The Ritz-Carlton developed a “Roadmap” to business excellence (see pages 3-4) which has attained significantly higher performance levels. A major ingredient of this approach was involving people in the planning of the work that affects them. The progressive removal of upper management from managing for quality produced negative effects on quality. Typically, performance either fell short of customer need or the cost to meet the need became excessive. In addition, the hotels accumulated huge chronic costs as a result of poor quality. 1 THREE STEPS OF SERVICE 1 A warm and sincere greeting. Use the guest name, if nd when possible. 2 Anticipation and compliance with guest needs. “We Are At The Ritz-Carlton, our Ladies and Gentlemen are the most important resource in our service commitment to our guests. Ladies and By applying the principles of trust, honesty, respect, integrity and commitment, we nurture and maximize talent to the benefit of each individual and the company. Gentlemen Serving Ladies and The Ritz-Carlton fosters a work environment where diversity is valued, quality of life is enhanced, individual aspirations are fulfilled, and The Ritz-Carlton mystique is strengthened. Gentlemen” THE RITZ-CARLTON® CREDO
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 ambience. The Ritz-Carlton experience enlivens the senses, instills well-being, and fulfills even the unexpressed wishes and needs of our guests. © 2000, The Ritz-Carlton Hotel Company, L. L. C. All Rights Reserved 2 The Ritz-Carlton® Basics 1. The Credo is the principal belief of our Company. It must be known, owned and energized by all. 2. Our Motto is: “We are Ladies and
Gentlemen serving Ladies and Gentlemen. ” As service professionals, we treat our guests and each other with respect and dignity. 3. The Three Steps of Service are the foundation of Ritz-Carlton hospitality. These steps must be used in every interaction to ensure satisfaction, retention and loyalty. 4. The Employee Promise is the basis for our Ritz-Carlton work environment. It will be honored by all employees. 5. All employees will successfully complete annual training certification for their position. 6. Company Objectives are communicated to all employees. It is everyone’s responsibility to support them. 7.
To create pride and joy in the workplace, all employees have the right to be involved in the planning of the work that affects them. 8. Each employee will continuously identify defects (M. R. B. I. V. ) throughout the Hotel. 9. It is the responsibility of each employee to create a work environment of teamwork and lateral service so that the needs of our guests and each other are met. 10. Each employee is empowered. For example, when a guest has a problem or needs something special, you should break away from your regular duties to address and resolve the issue. 11. Uncompromising levels of cleanliness are the responsibility of every employee. 2. To provide the finest personal service for our guests, each employee is responsible for identifying and recording individual guest preferences. 13. Never lose a guest. Instant guest pacif ication is the responsibility of each employee. Whoever receives a complaint will own it, resolve it to the guest’s satisfaction and record it. 14. “Smile – We are on stage. ” Always maintain positive eye contact. Use the proper vocabulary with our guests and each other. (Use words like – “Good Morning,” “Certainly,” “I’ll be happy to” and “My pleasure. ”) 15. Be an ambassador of your Hotel in a n d o u t s i d e o f t h e wo r k p l a c e .
Always speak positively. Communicate any concerns to the appropriate person. 16. Escort guests rather than pointing out directions to another area of the Hotel. 17. Use Ritz-Carlton telephone etiquette. Answer within three rings with a “smile. ” Use the guest’s name when possible. When necessary, ask the caller “May I place you on hold? ” Do not screen calls. Eliminate call transfers whenever possible. Adhere to voice mail standards. 18. Take pride in and care of your pers o n a l a p p e a r a n c e . E v e r yo n e i s responsible for conveying a professional image by adhering to RitzCarlton clothing and grooming standards. 19.
Think safety first. Each employee is responsible for creating a safe, secure and accident free environment for all guests and each other. Be aware of all fire and safety emergency procedures and report any security risks immediately. 20. P r o t e c t i n g t h e a s s e t s o f a R i t z Carlton hotel is the responsibility of every employee. Conserve energy, properly maintain our Hotels and protect the environment. © 2000, The Ritz-Carlton Hotel Company, L. L. C. All Rights Reserved Figure 1 The Ritz-Carlton Hotel Company, L. L. C. 1999 Application Summary 3 Fond farewell. Give them a warm good-bye and use their names, if and when possible.
THE EMPLOYEE PROMISE The Ritz-Carlton Hotel Company, L. L. C. 1999 Application Summary The Ritz-Carlton Chronology of Performance Excellence Genesis 1890’s Caesar Ritz defines Standards for a Luxury Hotel Apprentice Programs, Inspection/Audit by the Master 1900 General Manager Concept Delegation of Quality to Functional Managers Managers Plan / Workers Do 1980 1983 Extensive Participation of Horst Schulze in the Management of Quality • The Credo • Basic Standards for The Ladies and Gentlemen • A Passion for Excellence 1988 1989 MBNQA Audits and Feedback Business Excellence Roadmap (Figure 3) Involving People in the Planning f the Work that Affects Them 1999 100% Employee Pride & Joy Zero Customer Difficulties 100% Customer Loyalty Figure 2 2003 3 The Ritz-Carlton Business Excellence Roadmap Deployment “Do” Results “Check” Improvement “Act” A Passion for Excellence Senior Leaders “Start-Up” new hotels Performance Assessments Development / Training Plans Distribution of “The Pyramid” Leadership Center Daily Reinforcement of The Gold Standards 1. Leadership Approach “Plan” The Seven Pyramid Decisions MBNQA Developmental Job Assignments Basic Empowerment Process Divide/Subdivide Objectives Select Process Owners Actual versus Planned performance compared
Quarterly by Upper Managers at the corporate and hotel level Act on the Differences Evaluate / Improve Planning Process Develop Processes Provide Necessary Resources Daily Operations review by the workforce 4 3. Customer and Market Focus Market Research that concentrates on the quality of the hotel facility and operations 6P’s Concept Operation of the “CLASS” Database Daily Hotel Measurement • SQI • RevPAR by Market Segment Evaluate / Improve Annually Standard Performance Measurement Monthly Measurement • Advance Bookings • Customer Satisfaction • RevPAR • P&L 4. Information and Analysis Selecting Performance Measurements for: Upper Managers • Daily Operations Individual Process Owners select Performance Measurements for: • Upper Managers • Daily Operations Comparative Benchmarking Share/Replicate Best Practice Performance, On-Going Figure 3 Statistically Trained Employees, Consulting Specialists Continuous Improvement The Ritz-Carlton Hotel Company, L. L. C. 1999 Application Summary Fact-based Strategic Objectives Fact-based Key Process Identification 2. Strategic Planning The Ritz-Carlton Business Excellence Roadmap MBNQA 5. Human Resources Development and Management Approach “Plan” Results “Check” Improvement “Act” Employee Education, Training and
Development Q. S. P. Site Visits by Senior H. R. Leaders Day 21/365 Training Certification Review Performance Appraisal Assessments Analysis of Employee Surveys Analysis of Employee Surveys 6. Process Management Manage Key Production and Support Processes Incorporate changing Customer requirements P. Q. I. 5 S. Q. I. Major changes that require project management The GreenBook Process Audits Incremental Day-to-Day Improvements Actual versus Planned Performance compared quarterly by Senior Leaders at the corporate and hotel level Continuously and Forever Improve Process Owners Modify Processes for each new hotel 7. Business
Results Strategic Objectives define long-term targets Lead People Manage Processes Tactical Processes set annual targets Standard Performance Measures Daily Operations Review by the workforce Figure 3 (continued) The Ritz-Carlton Hotel Company, L. L. C. 1999 Application Summary Jobs are designed so our people: • Know what to do • Know how well they are doing • Can regulate the process or their own personal conduct Deployment “Do” The Ritz-Carlton Hotel Company, L. L. C. 1999 Application Summary Leadership as The Gold Standards, Figure 1, page 2. These standards consist of: (1) The Credo (2) The Basics (3) Three Steps of
Service (4) Motto and most recently, (5) The Employee Promise. These standards have had a long life with only The Basics changing with business conditions. Our Senior Leaders continue the strong excellencedriven leadership that began in 1983 and resulted in us becoming a recipient of the 1992 Malcolm Baldrige National Quality Award. In the years following the award they actually increased their involvement in both the improvement and operation of our structured approach to business excellence. A summary of this business excellence roadmap is shown in Figure 3, page 4. Collectively, these standards have an incredible empowering effect on The
Ritz-Carlton Ladies and Gentlemen to think and act independently with innovation for both the benefit of the customer and our organization. Approach “Plan” Since The Credo stresses “providing the f inest and anticipating the unfulf illed wishes of our guests,” The Ritz-Carlton Ladies and Gentlemen continually learn and innovate. The Three Steps of Service, combined with our basic empowerment process shown below in Figure 1. 2 promotes innovative, quick personal service. Our Senior Leaders have a passion for excellence, largely because of: (1) the performance expectations of Horst Schulze (2) our Gold Standards and (3) the Pride and Joy of chieving excellence. The seven specific decisions made by our Senior Leaders, collectively, to set direction for business excellence are shown below: 1. 2. 3. 4. 5. 6. 7. Deployment “DO” The specific actions taken by our Senior Leaders to deploy our leadership approach consist of three major processes: 10 Year Vision 5 Year Mission 3 Year Objectives 1 Year Tactics Strategy Methods Foundation 1. Since 1984, all members of Senior Leadership have personally ensured that each new hotel’s goods and services are characteristic of The Ritz-Carlton on opening day. Since six to seven hotels open each year, our leaders pend at least six to seven weeks working with our Ladies and Gentlemen (using a combination of hands-on behavior modeling and reinforcement) during the seven day countdown to opening. This includes the President and COO who personally demonstrates the guest/employee interface image and facilitates the first vision statement The process for providing our Senior Leaders with the necessary data and analysis to make these key decisions is explained fully in the Strategic Planning section. It is worth mentioning that our Senior Leaders personally established our foundation, which is now referred to
The Basic Empowerment Process Three Steps of Service 1 Warm Welcome 2 Anticipation and Compliance with Guest Needs Employee Senses Guest Wish or Need Employee Breaks Away from Routine Duties Employee Applies Immediate Positive Action Determine Guest Reaction If Satisfied If Dissatisfied 3 Fond Farewell Document the Incident Employee Returns to Routine Duties Figure 1. 2 6 Guest Memory System Escalate the Complaint The Ritz-Carlton Hotel Company, L. L. C. 1999 Application Summary Results “Check” session for each newly formed department. During these formative sessions which all employees must attend, the
President and COO personally interacts with every new employee both individually and in a group setting. His in-depth knowledge of hotel operations and enthusiasm for The Gold Standards are an inspiration for all concerned. Leadership effectiveness is evaluated (1) On key questions of our semi-annual employee satisfaction results (these questions reveal if the respective leader has gained the full support of the Ladies and Gentlemen regarding our Gold Standards). (2) Through audits on public responsibility (i. e. Life Safety Systems, Security Systems, Food Preparation and Alcoholic Beverage Service, Environmental Stewardship). . The results of the seven specific decisions from the annual strategic planning process are arranged in a “Pyramid Concept” and distributed throughout the organization. The 2000 Pyramid is shown in Figure 1. 3. Improvement “Act” Gaps in leadership effectiveness are ad3. The Gold Standards are reinforced daily dressed with development/training plans. For in a variety of forums which include: (1) widespread deficiencies, the corporate human lectures at new employee orientation (2) resource function develops/improves courses, developmental training (3) daily line-up processes or facilities.
As a result, we have 10 YEAR VISION meeting (4) administration of both posdeveloped a leadership center at Corporate To be The itive and negative reinforcement (5) Headquarters. In addition, we make exPremier Worldwide mission statements displayed (6) distensive use of developmental job assignProvider of Luxury tribution of Credo Cards (7) The ments. Credo as first topic of internal Travel and Hospitality Prodmeetings and (8) peer pressure. ucts and Services 5 YEAR MISSION Product and Profit Dominance OBJECTIVES T h e V i t a l – Fe w O b j e c t i v e s TACTICS Key Production and Business Processes
STRATEGY C u s t o m e r a n d M a r k e t Fo c u s S t r a t e g y w i t h Action Plans METHOD TQM – Application of Quality Sciences · M a l c o l m B a l d r i g e N a t i o n a l Q u a l i t y Aw a r d C r i t e r i a · T h e G r e e n B o o k – 2 nd E d i t i o n FOUNDATION Va l u e s a n d P h i l o s o p h y – T h e G o l d S t a n d a r d s Credo · Motto Three Steps of Service · Basics · Employee Promise Copyright © 2000 by THE RITZ-CARLTON HOTEL COMPANY, L. L. C. – All Rights Reserved Figure 1. 3 7 The Ritz-Carlton Hotel Company, L. L. C. 1999 Application Summary Strategic Planning Planning Process
At The Ritz-Carlton, Strategic Development is the process that enables Senior Leaders to make specific decisions that set direction for Business Excellence. 1 Macro Environment Analysis Confirm/Modify Vision, Mission, Strategy, Methods, Foundation Approach “Plan” A description of the three major components of our planning process, including the pre-work known as the Macro Environment Analysis, is show in Figure 2. 1. Macro-Environment Analysis This extensive analysis is done to understand the current state (and expected future state) of the Macro Environment in which we operate our company.
The key result of the analysis is a projection of the future state of The Ritz-Carlton relative to competitors and the expectations of hotel owners in primary performance areas. Subsequently, gaps are identified. 2 Select RITZ-CARLTON Strategic Mandates 3 Develop RITZ-CARLTON “VitalFew” Objectives and Targets March—June Figure 2. 1 Step 1 March – June Using the Macro Environment Analysis, Senior Leaders confirm the 10 Year Vision, 5 Year Mission, Strategy, Methods and Foundation or make changes. Step 2 March – June Deployment Process 5 1 Reinforce Pyramid Concept/ Plans/Budget Develop Production Processes 6
Using the Macro Environment Analysis, strategic mandates are identified along with gaps in performance. Step 3 March – June The strategic mandates and the gaps identified in the Macro Environment Analysis are used to create the Vital-Few Objectives for the next three years. The Objectives are designed to address the projected gaps identified in the Macro Environment Analysis and to maintain or enlarge The Ritz-Carlton advantage over competitors where these advantages exist. VitalFew Objectives are separated into multiple categories for two purposes: (1) respond to the Strategic Mandates and (2) represent all who are ffected by The Ritz-Carlton. The output of this step becomes our Pyramid (Figure 1. 3, page 7). Communicate Pyramid Concept to the Ladies and Gentlemen 2 Deploy Support Processes 7 Execute Plans 8 3 Develop Preliminary Plans / Budgets for L. L. C. and Hotels Daily Line-Up Reinforcement on-going throughout the year 9 Evaluate/Improve Planning Process 4 Finalize RITZ-CARLTON Pyramid Plan, Budgets for L. L. C. and Hotels Conduct Monthly Reviews of Plan at all levels. Collect information for the next cycle. October—February July—September Figure 2. 2 8 The Ritz-Carlton Hotel Company, L. L. C. 999 Application Summary Deployment “DO” Activities that have been agreed upon are then tied into our financial planning and budget process. The specific actions by Senior Leaders to deploy the Vital-Few Objectives are shown in Figure 2. 2. Steps 5 – 7 October – February Step 5 occurs during our semi-annual General Managers meeting which sets in motion steps 6 and 7. Step 1 July – September Key Production processes are identified by three criteria: (1) work that ranks very important to customers (2) work that is rising in importance to customers and (3) work that is poor in comparison to competitors.
These processes must then be developed and deployed. This is done by process owners at the corporate level. For a discussion of these processes and how they are developed see Section 6, Process Management. Step 8 On-Going Throughout the Year Every day, in every work area, on every shift, a brief line-up meeting is held. During these formative sessions, the Pyramid Concept is deployed, The Gold Standards are reinforced and good ideas are shared. Step 9 Annually Step 2 July – September Each year the Vice-President of Quality is responsible for evaluating and improving the Strategic Planning Process.
Benchmarking other Baldrige recipients is used extensively for continuous improvement. Support processes are deployed to the support functions of the organization. These processes indirectly affect our products and enable us to reach our Vital-Few Objectives. These processes are also developed/deployed by corporate process owners at the corporate office. Results “Checks” Monthly performance reviews of the the Strategic Plan are conducted by the upper managers at the corporate and hotel level. The framework of a typical review is shown in Figure 2. , which focuses on the pre-established performance indicators of the Vital-Few Objectives as well as key processes. This information allows us to easily make improvements and benchmarking comparisons which are discussed in Category 4. Steps 3 – 4 July – September To bring out into the open the resources required to reach our Vital-Few Objectives, we involve the Ladies and Gentlemen of The Ritz-Carlton. First, we communicate the measures and targets of our Vital-Few Objectives to lower levels of the organization. The lower levels then identify the deeds, that if done, will collectively meet the objectives.
The lower levels also “submit the bill” to perform these deeds. Focus Indicators What’s Reviewed Employee Pride & Joy • Key Survey Questions • Turnover Actual versus Plan / Trends Customer Loyalty • Overall Customer Satisfaction • Customer Difficulties Revpar / P&L • Advance Bookings • Market / Business Performance Actual versus Plan / Foremost Competitor, Trends Actual versus Plan / Industry Trends Key Processes • Key Production and Actual versus Support Processes Plan / Trends Figure 2. 3 Process Owner • Human Resource Director • Operations Director • Quality Director • Marketing Director • Finance Director Functional Leaders 9 The quarterly performance reviews are translated into opportunities for improvement and innovation. These decisions are determined by process owners with Helpance from the special organization of Directors of Quality. Widespread understanding and involvement of findings and actions are deployed to lower levels through: (1) the traditional hierarchy (2) process owners and teams and (3) Commitment to Quality newsletters. Another form of improvement is the Assessment of the Strategic Planning Process. The Vice-President of Quality is responsible for developing, benchmarking and improving his process. The Ritz-Carlton Hotel Company, L. L. C. 1999 Application Summary Customer and Market Focus A particularly noteworthy tool that we use is CLASS (an automated “memory system” that links returning guests to their preferences). The practice of remembering regular guests creates lasting relationships, which is a major competitive advantage for us. The types of information stored in the CLASS database are given in Figure 3. 2 . At The Ritz-Carlton, customer and market focus concentrates on the information needed for hotel development and operation explained in Section 6, Process Management.
Approach “Plan” In addition, we utilize other information technology: (1) DFS (2) Product Quality Indicators (PQI) and (3) Service Quality Indicators (SQI), explained in the next Section, Information and Analysis. The many needs and sources of this information (i. e. market research) are summarized in Figure 3. 1. Needs and Sources of Market Research at The Ritz-Carlton Needs for Market / Customer Information Brought to our Attention Readily Available but Requires Analysis Determination of Market Segments • Sales and Marketing function ranks potential and current customers by volume, geography and profit Analysis of “CLASS” database Identifying Potential Customers Relative Priorities of Customers • “Automated Memory System” that links returning guests to their preferences Widespread Customer Dissatisfaction Competitive Quality Status Opportunities for Improving RevPAR through Quality • Alliances with Travel Partners (Airlines, Credit Card Companies, Convention Bureaus, etc. ) • Same as above • Focus Groups • Customer Satisfaction results • Use of Information Technology • DFS Demand Forecast Individual Dissatisfaction of Customers Must be created by a Special Study • Complaints, Claims, Client
Alerts, Feedback from the Salesforce, Summarized in the SQI/PQI • Pareto analysis of the SQI and PQI • Ratings from Customers, Star Report, Salesforce reports • Summary of above analysis • Summary of above • Criteria, Rating and Awards from Travel Industry publications • Pareto analysis to identify major causes of customer dissatisfaction Figure 3. 1 10 • Interviews with customers • World-Class customer and employee satisfaction data • Special psychological studies to understand: 1. What Customers mean, not what they say 2. How to appeal to the customer in the language they most understand
The Ritz-Carlton Hotel Company, L. L. C. 1999 Application Summary Deployment “DO” to remember returning guests and generate essential preference and schedule information to all concerned. In this way, the Ladies and Gentlemen of The Ritz-Carlton and our suppliers understand what is “new or different” about each individual customer or event. The specific actions taken by our Sales and Marketing Leaders to deploy our Market Research conclusions consist of four major processes: (1) The 6 P’s Concept (2) Operation of the CLASS database (3) Complaint Resolution Process and (4) Standard Performance Measurements.
Standard Measurements The Six P’s Concept The major components of our Sales and Marketing Performance Management System are shown in Figure 3. 3. Since these measures both precede and lag the operation they are both forward-looking and reaction based. After we gain a full understanding of our market segments, customers and their relative priorities, we develop and distribute, internally, a 6P’s Concept. The concept consists of: (1) Problem or need of the Customer (2) Product (what is it) (3) Promises (what it can do for the customer) (4) Personal Advantage (what can the customer do because of it) 5) Positioning (the benefit of it versus the competition) and (6) Price/Value (what customers must give up in time or money to get it). These concepts lay the groundwork for process design. Subject Advance Bookings The 6P’s concept typically creates a vision of wellbeing, which results from the purchase of Ritz-Carlton products – genuine care, comfort and prestige. By disseminating this information into the marketplace, we reinforce an aura of competence. Service Quality Indicators (SQI) measure The Gold Standards Revenue Per Available Room (RevPAR) Customer Satisfaction Determination The P&L Statement
Figure 3. 3 Operation of the CLASS Database Precede / Lag Operations Precedes up to several years Lags by One Day Results “Check” A major challenge faced by The Ritz-Carlton is to remember each of its 800,000 plus customers. In response, a special organization exists in each of our hotels called Guest Recognition. This special function uses the CLASS database Lags by One Day Lags by 45 Days Lags by 40 Days The effectiveness of our Customer and Market Focus is evaluated through reviews of our standard performance measures daily, monthly and annually. Daily reviews at hotels consist of SQI and RevPAR y market segment and performance. • • • • • Likes/Dislikes Previous Difficulties Family Interests Personal Interests Preferred Credit Cards Recency/ Frequency of Use • By Hotel • All Hotels Lifetime • Usage • Amount of Purchase Monthly reviews at all levels consist of Advance Books, Customer Satisfaction, RevPAR by Market Segment and the P&L Statement. Knowledge of Individual Customers, Stored in CLASS Database Annual reviews at the corporate level are contained in our Strategic Planning Pre-Work, Macro Environment Analysis. Improvement “Act” The daily and monthly reviews identify performance gaps to be corrected.
The extensive analysis of the Macro Environment Analysis drives confirmation or changes in marketing strategy, objectives and plans. Figure 3. 2 11 The Ritz-Carlton Hotel Company, L. L. C. 1999 Application Summary Information and Analysis The PQI are our Product Quality Indicators, which consist of the 10 most serious defects that can occur in the development phase of a new Ritz-Carlton Hotel, listed in Figure 4. 4. Approach “Plan” Two basic types of measurements are used at The Ritz-Carlton: (1) organizational measurements for upper managers at both the corporate and hotel levels and (2) operational (i. . process) measurements for planning, assessing and improving daily operations. A further distinction in our measurement is whether it provides information before, during or after operations (Figure 4. 1–4. 3). PQI Defects 1. Sub-Standard Management Contract 2. Missing / Wrong Concepts 3. Late Feasibility Study 4. Wrong / Late Schematic Design 5. Detailed Design Changes 6. High-Risk Facility Suppliers 7. Late Construction Days 8. Missing / Inadequate Key Production and Support Processes 9. Inadequate Pre-Sales Results 10. Inadequate Caring Mindset of Employees Figure 4. 4
Before Operations Measures Subject MacroEnvironment Analysis Unit of Measure Summaries of Performance, Money, Ratios, Indexes New Hotel Development Defect Points (i. e. PQI) Daily Variable Demand Production/Hours worked ratio Use Annual Input for Senior Leaders to reset organizational and operational measures Measures for Senior Leaders to plan, assess and improve each new hotel development Plan daily operations and pricing Since our customer requirements extend beyond the functional to the sensory (which are difficult to measure), we rely on The Gold Standards to measure quality during operations.
Most of these measures are used by line level employees. We can do this effectively since the workforce is selected, trained, certified, reinforced and rewarded through our Gold Standards, This qualifies them to design the appropriate sensory measurements that allow them to assess their work and take appropriate actions. Figure 4. 1 The SQI are our Service Quality Indicators, which consist of the 10 most serious defects that can occur during the regular operation of a Ritz-Carlton hotel. The seriousness of each defect is weighted by a point value listed in Figure 4. 5. During Operations Measures Subject
The Gold Standards Unit of Measure Taste, Sight, Smell, Sound, Touch Use Operational measures for the individual Employee to Plan, Assess and Improve their Work SQI Defects 1. Missing Guest Preferences 2. Unresolved Difficulties 3. Inadequate Guestroom Housekeeping 4. Abandoned Reservation Calls 5. Guestroom Changes 6. Inoperable Guestroom Equipment 7. Unready Guestroom 8. Inappropriate Hotel Appearance 9. Meeting Event Difficulties 10. Inadequate Food/Beverage 11. Missing/Damaged Guest Property / Accidents 12. Invoice Adjustment Figure 4. 5 Figure 4. 2 After Operations Measures Unit of Measure Organizational
Performance Indicators, Money, 1–5 Scale, Percentages Key Production Weighted Defect Points (SQI) and Support Production/Hours Processes worked ratio Revenue per Available Room Figure 4. 3 Subject Vital-Few Objectives Use Improve Organizational Performance Improve Daily Operations Points 10 50 1 5 5 5 10 5 5 1 50 3 The total number of occurrences is multiplied by the weight, totaled and divided by the number of working days applicable to obtain an average daily point value. The average daily point value is disseminated to the workforce daily. Improve Pricing Policies 12 The Ritz-Carlton Hotel Company, L. L.
C. 1999 Application Summary Comparative Benchmarking process owners to each metric associated with key production and support processes. There are three types of comparative data at The Ritz-Carlton: (1) comparisons to industry and our foremost competitor (2) benchmarks outside our industry and (3) benchmarks inside our company. Since we began formal benchmarking in the 1980’s, we have found this highly useful as it has pushed us over the years to even higher target levels of performance and roadmaps to get there. Figure 4. 6 details the sources of this data and the types of information that are analyzed.
Since these process owners are heavily involved in designing the architecture of the data and information that they review, rarely do they see a fact or figure presented in a way they don’t understand. Results “Check” Since we place such a strong emphasis on fact-based decision making, reliability of the data is critical. We rely on our highly trained Ladies and Gentlemen (including statistically trained at all levels) to insure data and information reliability. At the corporate level, we assign individual process owners to assure data can withstand scrutiny and provide background information.
We also retain third-party specialists to provide independent reviews of information analysis and processes. Deployment “DO” The specific actions taken by Senior Leaders to deploy the information and analysis approach is based on the concept of individual process owners. Individual Process Owners Improvement “Act” Our Senior Leaders and Hotel Guidance Teams have the high level organizational performance data they need because we assign individual owners to each metric associated with the Vital-Few Objectives. In addition, our Vice-President of Quality keeps our performance measurements current with business needs.
Whenever our process owners and consulting specialists indicate a change of plan is needed, the plans are rewritten, rebudgeted and reapproved. Our Ladies and Gentlemen, on a daily basis, identify and implement improvements in performance measurement as expected in our culture and facilitated through the training and performance management programs outlined in Category 5. Our Ladies and Gentlemen have the operational performance data they need daily because we assign individual Sources of Comparative Data Internal Source External Information Source Each Hotel’s measurements in the areas RCHC of employee satisfaction, customer
Information, Analysis System satisfaction, RevPAR and operational performance are compared Information Ritz-Carlton Marketing and Finance RCHC functions compare us against our Information, Analysis System competitors in the area of market and business performance Process Champions Operations, Human Resources, Baldrige Award Marketing and Finance leaders drive Winners best practices and processes both up and down the organization Annually, the VP of Quality studies comparative data and best practices Regional VP Meeting These periodic meetings focus on review Kaznova of performance to plan Consultants
World-class benchmarks New Hotel Start-Up When Ritz-Carlton managers are assigned as trainers in a new hotel, they learn and share best practices Travel Publications, AAA, Mobil Criteria to identify industry trends and performance Best Practice Sharing Any “new idea” implemented is shared Mayflower company-wide via E-mail. Results and Group Improvements are communicated in the daily Commitment to Quality newsletter Travel Industry Criteria and Publications Figure 4. 6 13 The VP of Human Resources compares us to America’s most-admired companies (i. e. Fortune 500 and Baldrige winners) in the area of Employee Satisfaction
The Ritz-Carlton Hotel Company, L. L. C. 1999 Application Summary Human Resource Approach Human Resource Focus Skilled and Empowered Work Force Operating with Pride and Joy ?? Our human resource approach is summarized in Figure 5. 1, which is the well-established model that underpins and aligns our various human resource philosophies and programs. Ritz-Carlton Work Environment Approach “Plan” Ritz-Carlton Human Resources Fundamentals Our Senior Leaders decided to increase both the meaning and satisfaction our people derive from their work. This approach consists of three basic components: (1) our
Ladies and Gentlemen know what they are supposed to do (2) they know how well they are doing and (3) they have the authority to make changes in the process under their authority or their own personal conduct. • Quality Selection Process • Orientation • Training Certification • Line-up and daily training • Communication • Personal and professional development • Work/life issue management • Job Enlargement • Career progression • Performance measurement • Legal compliance • Employee Rights • Issue Resolution Process • Reward and Recognition Know What They are Supposed To Do At Ritz-Carlton our Ladies and Gentlemen know hat they are supposed to: (1) learn and use The Gold Standards (2) master the procedures of their job (i. e. Training Certification) and (3) generate ideas to improve products, services and processes. Know How Well They Are Doing Figure 5. 1 We keep our Ladies and Gentlemen informed on how well they are doing in many forms. They receive coaching from managers and peers on individual tasks throughout the day. Our education and training is designed to keep individuals up to date with business needs. The Corporate Director of Training and Development and the Hotel Directors of Training and Development have the responsibility to make ure that training stays current with business needs. To do this, they work with Human Resource and Quality Executives who input organization and job performance training requirements or revise existing ones. The flow of this process is shown in Figure 5. 2. Key developmental training needs are addressed through a core of courses that all employees receive. Daily, they receive information from the SQI report. Finally, they receive semi-annual performance appraisals on their general performance. The Authority to Make Changes The ability of our Ladies and Gentlemen to regulate ow work gets done is assured through Basic Standards set out in The Credo Card, “People have the right to be involved in the planning of the work that affects them”. All employees (regardless of their level in the company) receive the same mandatory two day orientation process, which includes classroom type training on The Gold Standards and The GreenBook (page 16). Deployment “DO” As shown in Figure 5. 2, we use input from employees and their supervisors in determining educational needs primarily via a review and analysis of our performance appraisal documents.
The Hotel Director of Training and Development and the Quality Trainers also receive and consider direct feedback from Ritz-Carlton personnel. When training is designed, it is piloted and approved in a fashion similar to the new product and service development process described in Category 3. Participants in the pilot provide direct, candid feedback to the designers and instructors. The specific actions taken to deploy our approach range across a broad spectrum, but most significant activities consist of: (1) The Quality Selection process and (2) Employee Education, Training and Development.
Our President and COO started as a waiter’s apprentice in Europe, and many of our executives started as front line personnel in Ritz-Carlton Hotels and were promoted as they rotated jobs. Therefore, training receives the highest attention in our company. 14 The Ritz-Carlton Hotel Company, L. L. C. 1999 Application Summary Departmental Trainer Evaluate Student Reaction/Needs Managers/Training Director Evaluate Performance appraisals/training results Vice-President, Quality Determine Organizational Performance Excellence Requirements Vice President, Human Resources Determine Organizational
Developmental Training Requirements Corp Director of Training and Development The Ritz-Carlton Design of Courses Confirm/Modify existing processes/Facilities Develop/Improve Courses/Processes/Facilities Project Team Codeveloped with supplier of new equipment/ Technology Outsource Figure 5. 2 “themes” of each job. The graph also contains comparative data which consists of industry and Ritz-Carlton norms. Although job induction training is classroom delivered by the Director of Training and Development and the General Manager, most training delivery is on-the-job. This onsists of: (1) daily line-up (2) self-study documents (3) developmental assignments and (4) training certification. Most training is evaluated through examinations, while other methods include audits, performance reviews and appraisals. Day 21 21 days after orientation, each orientation class reunites for a day of Assessment and debriefing. A similar session occurs on or near day 365. Approximately 80% of the training received by The Ritz-Carlton Ladies and Gentlemen is from in-house sources which allows us to have direct control over the method of training delivery and Assessment.
