A Case Studyon Assessing The Ritz-Carlton Hotel Company, L.L.C.

A Case Study on Assessing the RCHC Using MBNQP Award

A Case Study

on Assessing

The Ritz-Carlton Hotel Company, L.L.C.

Using the Criteria of Malcolm Baldrige

National Quality Award Program

Q.1 The Ritz-Carlton Hotel (RC) is in the Strategic Quality Management era. Our findings are based on the 6 ; View of Quality, Emphasis, Methods, Roles of Quality Professionals, Responsibility for Quality, and Orientation and Approach The President, Mr. Horst Schulze, and senior leaders of RC are of the view that quality is a pro-active way to keep pace with customer needs. Their emphasis is that quality a promising way to bring the hotel towards business excellence and thereby to attain higher performance standards. As the importance of it, the President personally and his team realized that managing for quality could not be delegated. Therefore they take charge of ite. Quality is everybody’s business. To instill the quality thinking into the hotel, senior leaders have adopted various methods at RC. Some of these examples include setting up the Credo to define the traits of all company products/services, translating the Credo into Basic Standards to clarify the quality responsibilities for Ladies and Gentlemen, adopting the MBNQA Criteria to assess and collect feedback, involving various levels of staff in planning the work, and so forth. The roles of quality professionals are acted as quality advisors. To avoid conflict of interest and maintain impartiality, quality professionals are outside the operations. Taking design of courses for education and training of staff as an example, the responsibility of ensuring that trainings stays with current business needs rests with the Corporate Director of Training and Development (T&D) and the Hotel Directors of T&D, whereas the Vice-President Quality is responsible for the input of job performance training requirements. In the RC, the responsibility for quality rests with every staff member, from top to lower levels, in the hotel. For example, at top management level, senior leaders spent 6-7 weeks with and personally Ladies and Gentlemen during countdown of hotel openings. For Ladies and Gentlemen, the company provided great flexibilities to allow them breaking away from routine duties and applying immediate actions to fulfil needs from customers. Assigning process owners (ie. Executive owner and working owner) in process management is another good example to illustrate the quality responsibility. Concerning the orientation and approach, activities and plans are “designing in” quality. For example, market researches cover both internal and external customers to identify processes, products and mission of RC.

Q.2 Based on the 7 Baldrige Criteria, the strengths and weaknesses of RC are summarized as following

1. Leadership

Senior leaders of RC not only establish a “Pyramid Concept” providing short- and long-term directions, strategy, and methods for the RC, but also set up the Gold Standards to guide their staff to work towards business excellent.
The Basic Empowerment Process allows Ladies and Gentlemen to think and act independentlyto fulfill customer needs. It further promotes staff providing innovate and quick personal services to their customers.

The management have not paid much attention to address their responsibilities to the public and practices good citizenship.

2. Strategy Planning

2.1 Strategy Development

Senior Leaders conduct Macro-Environment Analysis to confirm or make changes the “Pyramid Concept”. to set up strategic directions. Based on the results from the Analysis,
RC’s their
Strategic objectives and timetable to accomplish them are given in the development stage.
Issues and challenges identified in the Organizational Profile are addressed.

The planning has not focused on their supplier/partner strengths and weaknesses.
Procedures, like what key factors should been ...

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The management have not paid much attention to address their responsibilities to the public and practices good citizenship.

2. Strategy Planning

2.1 Strategy Development

Senior Leaders conduct Macro-Environment Analysis to confirm or make changes the “Pyramid Concept”. to set up strategic directions. Based on the results from the Analysis,
RC’s their
Strategic objectives and timetable to accomplish them are given in the development stage.
Issues and challenges identified in the Organizational Profile are addressed.

The planning has not focused on their supplier/partner strengths and weaknesses.
Procedures, like what key factors should been considered and how relevant data and information are collected and analyzed, are not laid down in the system in place.

2.2 Strategy Deployment

They follow the Vital-Few Objectives to develop and deploy processes, plans, and budgets.
Measures are taken to line up and reinforce Pyramid Concept, plans and budget.
Monitoring of performances, including monthly reviews of the Strategic Plan, quarterly reviews, and reviews for Vital Few Objectives, allows management to make improvements and benchmarking.

Projection of key performance indicators should be made to allow better management.

3. Customer and Market Focus

3.1 Customer and Market Knowledge

They carry out special studies in alliance with Travel Partners to determine market segmentation.
Researches from special studies, and sales and marketing identify potential customers.
They developed a 6P’s concept to determine customer needs and requirements for providing genuine cares, comfort and prestige to target customers.
They make use of the data collected from current and former customers through CLASS database, DFS, PQI and SQI to determine key product and service features.

Ways and strategies are limited to keep listening and learning from distinct customers.

3.2 Customer Relationships and Satisfaction

CLASS, an automated memory system, is utilized to link returning guests to their preference.
They group all complaints together and apply Pareto analysis to examine data from PQI and SQI.
SQI and PQI are used to measure most serious defects for analyzing customer satisfaction.
Competitive Quality Status is used to measure customer satisfaction and dissatisfaction.
Results from Sales and Marketing Performance Management System reflect customers’ future business.
Standard performance measures are carried out in daily, monthly and annual reviews.

Customer contact requirements and different modes of access are not included in the current system.
Mechanism has not provided for customer to seek information, conduct business and make complaints.
System is not found for managing complaint process, giving prompt and effective rectification.
New modes of customer access are not included in changing business needs and directions.

4. Information and Analysis

4.1) Measurement and Analysis of Organizational Performance

Organizational measurements and operational measurements are used to monitor performance of upper managers and daily operations, respectively.
Measurement systems are available to determine performance before, during or after operations.
PQI is adopted to gauge defects in the development phase of a new hotel, whereas SQI is adopted to detect defects during the regular operations.
RC selects and uses 3 types of comparative data for benchmarking; Comparisons to industry and their foremost competitor, benchmarks outside and benchmarks inside the industry.
RCHC information analysis system is established for assessing organizational performance and strategic planning.
Data collected are internally and externally analyzed and communicated via various sources.
Plans are rewritten, rebudgeted and reapproved if process owners and consultants indicate the need. Ladies and Gentlemen daily identify and implement improvements.
The VP, Quality is responsible to keep performance measurements current with business needs.

It seems that RC has not built up a centralized computer platform for analysis and storage of data.

4.2) Information Management

Senior leaders have the right of access high-level organizational performance data. Whereas Ladies and Gentlemen have the access of operational performance data.
Trainings are provided to Ladies and Gentlemen to insure data and information reliability.. A the corporate level RC assigns individual process owners to assure data can withstand examination.
Independent specialists are employed to provide reviews of information analysis and processes.

5. Human Resource Focus

5.1) Work Systems

Using 3 basic components, (1) know what they are supposed to do (2) know how well they are doing (3) authorize to make changes, to promote cooperation, initiative/innovation and flexibility.
Ladies and Gentlemen receive coaching from managers and peers on individual tasks.
Feedback to employees is given via their daily SQI report and semi-annual performance appraisals.

Mechanism has not been put in place to achieve effective communication and to share knowledge/skill.

5.2) Employee Education, Training and Development

Employees and their supervisors provide inputs via a review and appraisal to determine their education needs. Education and training is designed to keep employees up to date with business needs.
The RC Human Resources Fundamentals provide opportunities to employees to attain job-related and career-related development or learning objectives.
RC makes use of development assignments to expand employees’ knowledge and experience.
Training programs are evaluated by means of examinations, audits, performance reviews and appraisals.

Training on technological changes and occupational safety has not included.

5.3) Employee Well-being and Satisfaction

QSP, employee surveys and performance appraisal reviews are used to determine employee well-being, satisfaction and motivation value.
Improvement activities rely on internal audits, site visits by Senior HR Leaders and employee survey.

A system to ensure an environment, safety and health workplace has not been formulated to all employees.

6. Process Management

6.1) Product and Service Processes

RC identified key production processes via market research and discussed with employees and customers to identify and incorporate changes to administrative /support processes during annual strategic planning.
Process owners (executive owner and working owner) are assigned to take the responsibility for development/improvement of production and support process.
Design of production/support processes is based on market research, facility design & operating condition.

RC has not considered using and incorporating new technology into product/services processes and into their related production/delivery systems and process.

6.2) Business Process

Cross-functional terms use “After Operations Measures” & customer survey to improve business process.
RC implements a robust Supplier Compliance and Quality Form to measure supplier quality.

6.3) Support Process

To overcome resistance of changes, a support process has been laid down which consists of steering the importance of change, expressing confidence, providing reasons behind and allowing time to the changes.

Support processes are not provided in the areas of finance, accounting, HR services, public relations.

7. Business Results

7.1) Customer Focused Results

RC provides current levels and trends of customer satisfaction plus customer satisfaction of competitors.
They also provide levels and trends of product and service performance via Nationwide Surveys and studies from the Cornell School of Hotel Administration and McGill University.

Data and information on customer loyalty and positive referral are not included in the comparison.

7.2) Financial and Market Results

Financial and administrative indicators show that RC’s performance is growing positively and its performance is better than its foremost competitors.

7.3) Human Resources Results

Employee Satisfaction Survey shows that all issues are better than the service company norms. The % of turnover rate also shows the positive moves of employee well-being, satisfaction and motivation.
RC measures Pride and Joy in the workplace and participation of employees in planning of their work.

Data/information are not provided for analysis of employee performance & effectiveness of work systems.

7.4) Organizational and Effectiveness Results

As a result of preventive maintenance, the % repair and maintenance cost to total revenue drops slightly from 1996 to 1999 and the cost is comparatively lower than the Luxury hotels.
The total revenue per hours worked is improved and rise sharply from $37 in 1996 to $48 in 1999.
The cycle time for hiring new employees is dramatically reduced from 1996 to 1999.

Q.3 The major benefits that RC has achieved by applying and receiving the MBNQA are:

1) Enhancing Competitive Advantages:

Ensuring the survival facing the keen market competition: Quality should be implemented as it adds value to the efficiency or effectiveness of RC. To stay competitive in the marketplace and to keep pace with the industry, RC has applied the MBNAQ to strengthen its competitive advantage by improving the overall organization performance, the quality of service, the customer satisfaction, and hence the profits.

Competitive Awareness for Effective Strategic Planning: Competitive awareness plays an important role in RC’s strategic planning process. It helps RC to realize its strengths, weaknesses, opportunities, and threats ahead by studying the pace of competitive activities, benchmarking world-class processes, and analyzing the strategies of competitors. To accomplish that, MBNQA provides an excellent platform for RC.

Differentiation from Competitors: Due to the economic recession and globalization, more and more competitions between hotels are not unanticipated. Without proper management and control, such competitions may end up with poor quality of products/services and customer dissatisfaction. The MBNQA’s criteria helps RC differentiate itself from most of its competitors, thus more likely to survive in the market.

2) Growth Market Share – Strengthening Customer Loyalty:

Customer loyalty and repeat business are only possible if a firm is able to provide its products/services at reasonable price and to give prompt responses to the increasing demands from customers. MBNQA facilitates RC to achieve the customer-driven excellence and to increase customer satisfaction sharply. A research revealing that 75% of RC customers would not use their competitors regardless of their offer, is the best way to express the importance of customer retention

3) Significant Profit Growth:

The ultimate goal of RC is to gain profits. By applying the MBNQA, the management system in place has been improved which leading to the growth of profit. The areas of growth include the pre-tax return on investment and administrative costs, the total revenue per hours worked, and the gross profit.

4) Cost Efficiency:

In order to stay competitive in the market, every company should plan and control its cost efficiently. Cost efficiency is not merely means to cutting cost; it means that every dollar to be spent should be planned carefully and worthily. With the help by MBNQA, RC demonstrates his ability to improve its cost efficiency by reducing the repair/maintenance cost and the administrative costs.

5) Strengthened Productivity of Work Force:

A company’s success depends on the knowledge, skills, creativity, and motivation of its employees. RC has dramatically improved the Employee Satisfaction by applying MBNQA. And by adopting a more effective hiring process and lowering the turnover rate, RC reduces its administration cost, training cost and increases the productivity and morale of staff. Besides that, employee empowerment and involvement of staff in decision making are proved to be an effective means of no only encouraging staff participation and loyalty, but also leading to the increase of employee satisfaction and to unify the entire organization on a common set of goals.

6) Acceleration of Continuous Improvement:

MBNQA accelerate continuous improvement. It creates an accountability that moved the organization faster and further than it could have done on their own. The feedback report from MBNAQ is an important self-assessment that helps the organization to improve continuously.