Baldrige Award
Winner Profile
 

An interview with
Horst Schulze, president and COO
of The Ritz-Carlton Hotel Co. LLC

by Robert Green

On Feb. 25, President Clinton and Commerce Secretary William Daley presented the 1999 Malcolm Baldrige National Quality Award to four companies in a ceremony held in Washington, D.C. Among those companies was The Ritz-Carlton Hotel Co. LLC, the only two-time winner in the service category (1992 and 1999).

 What follows is an interview with Horst Schulze, president and COO of Ritz-Carlton. This is the last of four interviews conducted with a representative from each 1999 Baldrige Award winner .

 Ritz-Carlton operates 36 hotels (25 city hotels and 11 resorts) worldwide. To maintain its status as the world's premier hotel chain, the company uses a philosophy it calls "The Gold Standards" in its continuous improvement endeavors. More than 17,000 Ritz-Carlton employees worldwide embrace and energize these guidelines to provide groundbreaking levels of customer service and satisfaction.

QD: Everyone has a slightly different definition of quality. How do you define quality?

Schulze: To me, basic quality is understanding not just what the customer wants but truly understanding the customer and then creating processes--with the involvement of the employees connected with each process--to deliver that. And finally, quality means continuing to see how well you're doing and how to do it better, and then doing that, eventually bringing the processes to zero defects.

QD: A major theme of your Baldrige acceptance speech was the Ritz-Carlton motto "We Are Ladies and Gentleman Serving Ladies and Gentlemen." What is the underlying philosophy there?

Schulze: Our philosophy is that an organization should not be consumed just with its function but be philosophically driven as well. And that philosophy should be properly defined and properly aligned with all employees of the organization.

 "Ladies and Gentleman" has two values to us. Of course, the first is the expression of our expectations of our employees, from the president to the vice president to the last housekeeper or dishwasher. It expresses to them an expectation of how to behave, look and so on. At the same time it expresses a promise to the same group that they all are important to this organization. Their jobs may be different, but they're equal. They are in service but aren't servants.

QD: Ritz-Carlton is the only service company to win the Baldrige twice, in '92 and '99. When did you first begin your Baldrige journey?

Schulze: In 1986, when we were named best in the industry and only had five hotels, I was looking at our organization and how to improve it. They said we were the best, which is always questionable. But if we were the best, we had to be the best of a lousy lot, because we weren't nearly perfect.

 I was looking for something to ensure that we would continue to improve over the years. But as I began to look around, I couldn't find a benchmark, a philosophy or a direction in the hotel industry that would do. I began looking at other industries for the next couple of years. In about 1988, I started to hear about the Baldrige criteria from those companies.

 After talking to some people from the National Institute of Standards and Technology, I found that the Baldrige focuses on continuous improvement--the very thing that I was looking for. So, slowly, in 1988 and 1989 we began installing the Baldrige criteria in the company, and it's been part of the organization ever since.

QD: All of the four 1999 Baldrige winners have a lot of good things to say about this process, but none seem be able to quantify the expense or return. Financially, how expensive was getting your company to the Baldrige level?

Schulze: (Laughter) I think that's one of the biggest fallacies out there. I cannot even comprehend how we could afford not to be involved in improving quality. I can only say that since this improvement effort has begun, we reduced our employee turnover from 80 percentage points to the middle 20s, and that's in an industry that runs at around 100 percent. And with a labor force of nearly 20,000 employees, you can imagine how much money we now save. Turnover is very expensive.

 We also have considerably fewer defects in the organization than we used to. Defects are very costly. So I can't even comprehend how we could financially survive in our market without being in quality. It's an investment that has to be made. It also costs me to buy bed sheets, but I certainly couldn't live without them. In thinking of quality as an investment, there's absolutely no higher return on any of our other costs.

QD: Have you come across any other criteria or standards beside those of the Baldrige Award that very well match the requirements for a service company?

Schulze: You might be amazed, but no hotel company has ever been able to be a leader in the top market segment for very long. My quest was getting to that level of excellence and not falling. How can I avoid slipping from the top segment and into another? The only way you can do that is by not standing still, by continuously improving, and "quality" is the way to do that.

 Of course the Baldrige criteria is just a piece of the quality picture as far as I'm concerned--a very good one, but still just a piece of the whole. Obviously nobody else found a formula, or all those companies wouldn't have given up that top market place. But I'm totally confident that as long as we continue to improve, we can be the leader in the top market place indefinitely. How can anybody take that position away from you if you improve?

QD: How fluid is your industry? Are there customers in this new decade who are looking for things that they weren't looking for in the '90s or the '80s?

Schulze: Things are changing dramatically. I can tell you that only three years ago, no customer asked for high-speed Internet access. Today, every customer asks for it. Guests today have knowledge of amenities totally different from guests of five years ago. You couldn't even serve our market segment with the same quality bed sheets as we once did. You have to have much higher quality linen on the beds. There is a higher level of sophistication, higher expectations, because our customers travel. So there is an evolution--a constant revolution of new expectations.

QD: As a leader, how do you stay ahead of the customers in terms of determining their needs?

Schulze: We study our customers in a very careful and scientific manner using a process called Project Ritz. We use companies to help analyze that data and determine what our customers think the Ritz-Carlton hotel of tomorrow should be. We have conducted about 50 focus groups with real professionals who lead the focus groups and analyze the results.

 Our standards and guidelines at Ritz-Carlton are determined by customer feedback--what the people who constitute our primary concern want. That's quality.