[The following article appears in the January, 1994, edition of _Hemispheres_, pp. 33-36.] 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."