Senior executives at the Ritz Carlton strive to balance efficiency and quality with the goal of maintaining the hotel’s reputation for creating an aura and experience of old- world elegance and legendary grandeur in locations ranging from the United States to Bahrain to China. If executives were to focus on quality, what precisely would this mean and how might they measure it?
Ritz Carlton’s strategy is to create an outstanding experience for its guests. One way to cre-ate this experience is to build hotels with stunning lobbies and spacious and elegant rooms and to hire and train a staff that provides excellent customer service. Project teams build each hotel with the usual “Ritz- Carlton” splendor, and maintenance teams ensure that the hotel preserves this décor and high level of service.
Questions
1. Consider the time it takes to register guests. Give an example of a cost in each costs of quality category— prevention costs, appraisal costs, internal failure costs, and external failure costs.
2. For each of the following perspectives, describe two measures that the Ritz- Carlton managers could use when evaluating quality, (a) customer perspective (b) internal business- process perspective and ( c) employee perspective? Explain why you think your choices of measures are important for Ritz- Carlton.
3. What actions can Ritz- Carlton’s managers, staff, and employees take to improve quality?
4. What do you think about the idea of organizing employees into “ self- directed” teams? Explain.
5. Would you advise the Ritz- Carlton to focus on quality? Why? Explain.
SOLUTION
The case is intended to get students to think about quality from a strategic viewpoint. Should quality be an important area of focus for the Ritz-Carlton? Would it distract employees from other more important goals? If the Ritz-Carlton is to implement quality initiatives, how should it do it? Would “self-directed teams” be a good way to motivate employees to focus on quality?
1. To reduce the time to register guests, Ritz-Carlton could look at the following costs of quality:
Prevention costs: Training of registration staff, number of registration staff
Appraisal costs: Audit of average time it takes to register guests, time spent by supervisors reviewing work of registration staff
Internal-failure costs: Cost of repeat transactions because of errors in assigning rooms to guests; room changes because the room assigned was inconsistent with the guest request (for example, two queen beds instead of one king bed); costs of time delays for obtaining credit card approvals;
External failure costs: Opportunity cost of disappointed guest caused for example by assigning an un-cleaned room to the guest; opportunity cost of upset customers as a result of long wait times.
2. Students might suggest the following measures that Ritz-Carlton could use to evaluate how well it is doing with respect to quality:
Customer perspective: Percentage of highly satisfied customers; number of return visits to a Ritz-Carlton property in a year; number of customer complaints; number of meals returned to the kitchen due to dissatisfaction with the food.
Internal-business process perspective: Daily quality reports on operations such as average time to register guests, waiting time for room service, waiting time in restaurants, waiting time for valet parking; number of actions taken on guest complaints/incidents.
Employee perspective: Employee satisfaction; employee turnover; hours of employee training and development.
Ritz-Carltons’s managers, staff, and employees can take several actions to improve quality.
a. Managers can empower employees and staff to take action when problems arise, particularly with guest relations (each employee can be given the freedom to spend up to $2,000 per guest to correct a problem, without seeking manager approval first). In turn, staff and employees must use this empowerment to improve customer satisfaction.
Managers define standards against which actual performance can be measured. Employees and staff must be willing to be accountable and responsible for achieving high levels of customer satisfaction and improving internal processes.
Changing compensation from rewarding for “command and control” to leadership, team building and group success. Employees must work hard to work together as a team to improve processes and satisfy customers.
Managers must regularly train and educate employees to keep quality foremost in mind. Quality is not a one-time goal, so continual reinforcement helps with this effort. Managers must also seek to reduce employee turnover because of the negative effects this has on quality.
Managers, staff, and employees must never be satisfied with the status quo or become complacent.
Managers may want to increase staffing in registration, guest services, room service, and valet parking to reduce wait times while ensuring caring and courteous norms of behavior.
g. Managers, staff, and employees must work together to create a culture of “Doing things right the first time.” This improves quality and reduces costs by focusing on:
Prevention1 and proactive solutions—training, good design, and research into new methods. This is opposed to after-the-fact fixes leading to poorer customer experiences, higher customer service costs, and higher maintenance costs.
Repeat business, which costs less and attracts guests willing to pay more for quality.
This question is likely to generate a lot of discussion with students strongly supporting opposing points of view. The instructor should start the discussion by asking students about the pros and cons of organizing employees into self-directed work teams.
| Advantages | of self-directed work teams | of self-directed work teams | Disadvantages | Disadvantages | of self-directed work teams | of self-directed work teams | of self-directed work teams | of self-directed work teams | |
|---|
| | | | Strong employee empowerment, | Strong employee empowerment, | Strong employee empowerment, | Strong employee empowerment, | Strong employee empowerment, | Lack | |
| of coordination | of coordination | of coordination | | | | | | | |
| engagement, and responsibility | engagement, and responsibility | engagement, and responsibility | Loss of control | Loss of control | Loss of control | | | | |
| | | | Employee | ownership | ownership | and | accountability | accountability | |
| | | | Risk of no one being in charge | Risk of no one being in charge | Risk of no one being in charge | Risk of no one being in charge | Risk of no one being in charge | | |
| | | | Employee | motivation | motivation | and | commitment | commitment | |
| | | | Lack of tough feedback when things go | Lack of tough feedback when things go | Lack of tough feedback when things go | Lack of tough feedback when things go | Lack of tough feedback when things go | Lack of tough feedback when things go | |
| | | | People closest to problems solving issues | People closest to problems solving issues | People closest to problems solving issues | People closest to problems solving issues | People closest to problems solving issues | People closest to problems solving issues | |
| | | wrong | | | | | | |
| to improve quality | to improve quality | to improve quality | Lacking of management and a boss who is | Lacking of management and a boss who is | Lacking of management and a boss who is | Lacking of management and a boss who is | Lacking of management and a boss who is | Lacking of management and a boss who is | |
| | | | Better | customer | customer | responsiveness | responsiveness | responsiveness | |
| | | | accountable | accountable | | | | | |
| | | | Faster decision making Lack of processes | Faster decision making Lack of processes | Faster decision making Lack of processes | Faster decision making Lack of processes | Faster decision making Lack of processes | Faster decision making Lack of processes | |
| | | | | | | Social control with | Social control with | Social control with | |
| each member of the | each member of the | each member of the | | | | | | | |
| team looking out for the other | team looking out for the other | team looking out for the other | | | | | | | |
| | | | | | | More | | innovation | |
| for doing things better | for doing things better | for doing things better | | | | | | | |
| by individuals responsible for the tasks | by individuals responsible for the tasks | by individuals responsible for the tasks | | | | | | | |
Employee development through better training
The instructor should then call on students to take a position. This is also a good time to take a vote to see how many students favor “self-directed teams” and how many do not. Each time the students argue for “self-directed teams,” the instructor should point to the disadvantages listed above. If students argue against “self-directed teams” the instructor should point to all the advantages of “self-directed teams” that would be lost.
In concluding this discussion, the instructor should point out that managers have to perform a balancing act. When managers implement “self-directed teams,” they must also think about the challenges listed above. To overcome these challenges, they must set measurable goals for the outcomes that the teams must achieve and appropriate incentives for achieving them. If these outcomes are not achieved, they would need to intervene. They must train workers to understand hotel operations and serve as resources to help teams achieve their goals. They must create performance cultures that inspire and motivate teams to achieve success.
At this point, the instructor should move to asking the last question posed in the case.
5. Students are unlikely to agree on whether Ritz-Carlton should have a quality focus or not. The instructor should start this discussion by building the arguments why Ritz-Carlton should and should not focus on quality.
| Arguments in favor of having a quality focus | Arguments in favor of having a quality focus | | | |
|---|
| | Guests | care | about | |
| efficient room service, guest reservation and registration, and breakfast service even in | efficient room service, guest reservation and registration, and breakfast service even in | efficient room service, guest reservation and registration, and breakfast service even in | |
| | the case of a luxury hotel | | | |
| | Quality | | is | |
| | important for customer service because guests remember situations of poor quality | important for customer service because guests remember situations of poor quality | | |
| | Quality | enhances | enhances | |
| | customer experience and customer satisfaction because customers expect good quality | customer experience and customer satisfaction because customers expect good quality | customer experience and customer satisfaction because customers expect good quality | |
| | Ritz-Carlton | Ritz-Carlton | can | |
| spend money on quality because of its premium prices | | | |
| Arguments against having a quality focus | Arguments against having a quality focus | | | |
| | An excessive focus | An excessive focus | An excessive focus | |
| On quality and efficiency distracts from providing service. Employees should not cut | On quality and efficiency distracts from providing service. Employees should not cut | On quality and efficiency distracts from providing service. Employees should not cut | |
| | corners on tastiness of food just to deliver food faster to the rooms. | | | |
| | The focus | The focus | should | |
| be on delighting the customer by being courteous, polite, and taking the necessary time to | be on delighting the customer by being courteous, polite, and taking the necessary time to | be on delighting the customer by being courteous, polite, and taking the necessary time to | |
| | do things right not on faster service. | | | |
| | Money | can be | can be | |
| better spent on improving and preserving the grandeur of the hotel, its lobbies, and its | better spent on improving and preserving the grandeur of the hotel, its lobbies, and its | better spent on improving and preserving the grandeur of the hotel, its lobbies, and its | |
rooms (art, furniture, carpets, tapestry, etc.) and maintaining its aura, elegance, and charm rather than on measuring and developing benchmarks for valet parking and housekeeping.
Once again, this is a balancing act. Ritz-Carlton should not focus excessively on quality for all the reasons described above. At the same time, it cannot ignore delivering service efficiently because customers get impatient if they have to wait. The high margins that the Ritz-Carlton charges allows it to employ larger numbers of people so that employees can pamper guests while still providing quality service.
The instructor can conclude class by pointing out that the Ritz-Carlton does use “self-directed teams.” Managers do not dictate orders in a command-and-control mode but rather serve as facilitators and resources for their work force. As part of its effort to create “self-directed teams,” the Ritz-Carlton invests heavily in training. As a manager in the case mentions, Ritz-Carlton’s core belief is that an educated and informed employee is in a better position to make decisions that are in the best interest of guests and the organization as a whole.