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  CULTIVATING QUALITY THE RITZ-CARLTON
                                   
                       by Echo Montgomery Garrett

     Echo Montgomery Garrett writes about management issues for
     national business magazines. She is co-author of How to Make
     a Buck and Still Be a Decent Human Being (Harper Business).
    

     The ultimate aim of The Ritz-Carlton Hotel Company is 100
     percent customer satisfaction. And by focusing on training,
     detail, and service, strategies any business can profit
     from, it looks as if they may very well achieve it.
    
     Welcome to Day 21, three weeks after the Ritz-Carlton's new
recruits went through two days of training. At this follow-up,
training manager Perri Prevolos is coaxing the recruits to share
war stories about providing "lateral service" to their
co-workers. One burly man who works in banquet setup tells about
a stormy night when he'd already clocked out and ran into the
rain-soaked beach manager struggling to get hotel equipment off
the, beach. He helped get the umbrellas and catamarans away from
the rapidly rising tide.

     "Very good. That's numberr 20 of our Ritz-Carlton Basics,"
says Prevolos, reciting, "Protecting the assets of a Ritz-Carlton
Hotel is the responsibility of every employee." Each employee
carries "The Gold Standards," a laminated card emblazoned with
the company credo and 20 basics key to the Ritz-Carlton culture.

     Prevolos' job is to help new hires become well versed in
making a guest's stay not just satisfactory, but memorable. A
"Hi, how's it going?" constitutes blasphemy. "Good morning" or
"good evening" are the proper greetings. Any guest request is
answered with "certainly" or "my pleasure." Never mind that most
of today's 15 attendees work in the kitchen or other
behind-the-scenes jobs with rare guest contact. Indoctrination in
the Ritz credo helps them under stand how their jobs impact
co-workers and guests.

     Next, a quality manager explains the daily defect reports
that employees fill out from guest incident action forms
and maintenance requests. She proudly tells the group that
because their colleagues took the time to document continual
problems with the toilets, the manufacturer replaced them at no
cost to the hotel. Here, she explains, the system rewards those
who point out "challenges," a Ritz-Carlton euphemism for
problems.

     Head concierge James Gibbs arrives to take the group on a
tour of the hotel's $3 million antiques and art collection. "We
want guests to think of this hotel as home, but it's also a
museum," says Gibbs, a member of the prestigious Les Clefs d'Or
concierge society. As he points out two extremely valuable
Oriental rugs in the lobby, one young man who works in banquet
setup murmurs that he'll be even more careful moving the fur-

niture from now on.

     Such attention to training and detail garnered The
Ritz-Carlton Hotel Company the prestigious Malcolm Baldrige
National Quality Award in 1992, making it the third service
company to win. (AT&T Universal Card Services and Federal Express
Corporation were the others.)

     Getting there wasn't easy.

     Horst Schulze remembers the moment vividly when he realized
his best wasn't good enough. That day back in 1987, just after
the hotel chain was named the top hotel operator by a travel
magazine, the German-born president and COO of The Ritz-Carlton
Hotel Company was confronted by several complaint letters from
dissatisfied guests. He says, "Clearly, there were many people
with whom we weren't number one."

     Schulze immersed himself in the works of the quality
movement's masters: Deming, Juran, and Crosby. He was baffled by
much of it and soon realized that most advice was geared toward
manufacturers. That same year, the U.S. Congress inaugurated the
Malcolm Baldrige National Quality Award "to encourage American
business to practice effective quality control in the provision
of their goods and services."

     Like most hotels, the Ritz-Carlton had some deeply ingrained
problems to overcome. For one, employee turnover was a horrendous
110 percent. Although a common figure in the industry, Schulze
knew his dream of quality would require intense training--too
costly if turnover stayed lofty. Perhaps the biggest obstacle was
his own thinking. "I'd been in the hotel business almost 40
years," says Schulze, who started as a busboy in a hotel
restaurant. "Considering new solutions was difficult at first."

     Schulze focused on hiring and training. Interviewing became
the Targeted Selection Process. On the first interview, the
potential hire is asked detailed questions designed to match the
candidate with the right job. A critical trait? Genuinely caring
about others' comfort. The taped, hour-long session is
scrutinized obsessively before the person is invited to a second
interview. The third interview is with the department head.

     Says Prevolos, "If they make it to orientation, we want them
to know they were selected. For each person sitting in the room,
10 others applied for that position."

     Schulze conducts orientations at all new hotels himself. On
the first day, he delights in the wide-eyed stares he gets when
he declares, "My name is Horst Schulze. I am the president of
this company and a very important person." He pauses dramatically
before adding, "So are you. Although we serve, we are not
servants. We are ladies and gentlemen serving ladies and
gentlemen."

     The real changes started when he got the Baldrige
application in order to figure out what was required of entrants.
He was vexed by the terminology and called in a friend from IBM
to interpret terms like "processes," "continuous improvement,"
and "defect removal." He religiously studied corporate cultures
of past winners like Motorola and Milliken & Company. Once he
grasped the terminology, his mission was to create a new culture
at Ritz-Carlton.

     During this time, the hotel company was expanding rapidly.
William B. Johnson, an Atlanta real estate investor who made his
fortune as owner of 111 Waffle House restaurants and 12 Holiday
Inns in the Southeast, paid $70 million in 1983 for the
100-year-old Ritz-Carlton name and trademark, as well as the posh
Boston Ritz-Carlton. Since Johnson's purchase 10 years ago, W.B.
Johnson Properties, Inc., the parent company of The Ritz-Carlton
Hotel Company, has brought 26 new hotels or resorts and three
existing ones under its management. Although Johnson owns a
handful of the properties, his privately held company's prime
role as manager is to ensure that its 14,000 employees maintain
the same high standards at all the Ritz-Carlton properties.
Together, the hotels had roughly $600 million in sales last year.

     Ritz-Carlton recently opened a Hong Kong development office
to oversee its ventures in the Far East. "We go where our
customers go, and business travelers are in that part of the
world," says Schulze.

     That determination to let customers lead has played a major
role in Ritz's Total Quality Management (TQM) program. Indeed,
customer focus and satisfaction accounts for 300 out of the
possible 1,000 points a company can score from the Baldrige
committee. "Our goal is to do things right the first time," says
Schulze, jacketless and settled comfortably in a chair in his
conservatively decorated office in Buckhead, a fashionable sec-

tion of Atlanta. "The people who know where the system isn't
working are on the front line. We had to give them the tools to
do their jobs and make it easy to report defects."

     Each employee is authorized to spend up to $2,000 to make a
dissatisfied guest happy. Employees post ideas on cutting costs
or improving service on the bulletin board and within a week are
expected to file a report on what economic impact their sugges-

tion would have. For example, Zandra Heckman, responsible for
guest history in Naples, saved the chain almost $5 million
annually by suggesting a change in coding that would enable the
hotels to dump guest-related computer files that it no longer
needed to track. For successfully implemented money-saving
suggestions, as well as exceeding the Ritz's stringent standards
for daily job performance, employees are rewarded with
recognition and a program of cash bonuses and prizes that
includes travel and even dinner for two at their own hotel.

     The Ritz-Carlton was a finalist in the Baldrige competition
in 1991 and received 121 quality-related awards. "Although we had
the processes in place, we weren't good at measurements yet,"
says Schulze. But the grueling application process yielded advice
from top-flight consultants. By the next year, Ritz-Carlton had
identified 720 work areas in its system and compiled data on
everything from how long housekeepers take to clean rooms to how
long guests must wait for check-in. Each employee received 126
hours of training on quality, and employee satisfaction rose,
too, evidenced by the reduction of turnover from 110 percent to
below 30 percent.

     Still, the Ritz's devotion to quality is not without
critics. "People [in the industry] are always taking potshots at
us," states Schulze, "because they don't understand us." The
potshots relate to rumors of the unprofitability of some of the
properties Ritz-Carlton manages. Rejecting such rumors, Dan
Daniele, director of hospitality consulting services for Ernst &
Young in Chicago, says, "In the 1980s, the cost of building
luxury hotels got out of hand. That's not a reflection on
Ritz-Carlton. Its TQM program takes the long-term perspective and
benefits owners who are patient." Indeed, the chain's occupancy
rate is above the 70 percent average of other luxury hotels, and
its average room rate is more than double the luxury chain
average of $106, measured by Smith Travel Research in Gallatin,
Tennessee.

     Yet, like a petulant guest, Schulze refuses to be satisfied,
bristling at the suggestion that some companies falter after
they've won a Baldrige. After winning, he seized on the 75 areas
of improvement suggested by the jurors. His 1996 goal is zero
defects and 100 percent customer satisfaction.

     To that end, the company has compiled an extensive computer
data base that costs $1 million annually and holds information on
the likes and dislikes of 500,000 guests. If, for example, a
guest in Palm Beach wants eggs soft-scrambled and four newspapers
delivered each morning, that's duly noted and automatically
fulfilled no matter which Ritz the guest chooses next, from Hong
Kong to Houston. Says Schulze, "We even want to meet our guests'
unexpressed wishes."

     The one secret he withholds from guests and employees alike?
His favorite hotel in the chain. Schulze grins and replies
diplomatically, "Last week I was at our resort in Mauna Lani,
Hawaii, and I thought, 'This is it. The absolute best.' Then on
the way home I stopped at Laguna Niguel, and I thought, 'No, this
is my favorite.' It changes all the time." 

 

 

 

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