the malcolm baldrige national quality award case study
TRANSCRIPT
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The Malcolm Baldrige National Quality Award Case Study:
Ritz-Carlton Hotel Company, L.L.C.
Chakrit Chansukko William Firman Ha Tuan Anh
Abstract
The Malcolm Baldrige National Quality Award framework is probably the best-known
excellence award model, and the world’s most widely used excellence framework for
self-assessment. The criteria are designed to help organizations improve their competitiveness
by focusing on two goals: continually delivering improved value to customers, and improving
overall organizational performance. Our final project concentrates on Ritz-Carlton Hotel
Company, which receives the Malcolm Baldrige National Quality Award in the service
category. The Ritz-Carlton Hotel Company manages thirty six luxury hotels in North America,
Europe, Asia, Australia, the Middle East, Africa, and the Caribbean. All have received four- or
five-star ratings from the Mobil Travel Guide and diamond ratings from the American
Automobile Association. The Ritz-Carlton company has received all the major awards the
hospitality industry and leading consumer organizations can bestow. It is the first and only
hotel company twice honored with the Malcolm Baldrige National Quality Award from the
United States Department of Commerce. The Ritz-Carlton method is close attention to
performance data collection and a broad educational platform to deliver the findings. In this
report, we will study deeply about The Ritz-Carlton Company, the external and internal
performance of the company. We will try to describe the operation of company, to analyze
how the company uses the Malcolm Baldrige framework for self-assessment and then
improve himself to become excellent. Additionally, we will examine the Malcolm Baldrige
National Quality Award. How does it impact the company both of benefit and potential
problems in the next period after receiving this award? We also make a recommendation
regarding to the Malcolm Baldrige model in order to face the future challenge of dynamic
organization environment and characteristic as well as the possibility of inappropriate
approach of Malcolm Baldrige in this case study.
Keywords: MBNQA, Business Excellence, Performance
1. Introduction
The Malcolm Baldrige National Quality Award framework is probably the best-known
excellence award model, and the world’s most widely used excellence framework for
self-assessment. The criteria are designed to help organizations improve their competitiveness
by focusing on two goals: continually delivering improved value to customers, and improving
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overall organizational performance.
Our final project concentrates on Ritz-Carlton Hotel Company, which receives the
Malcolm Baldrige National Quality Award in the service category. The Ritz-Carlton Hotel
Company manages thirty six luxury hotels in North America, Europe, Asia, Australia, the
Middle East, Africa, and the Caribbean. All have received four- or five-star ratings from the
Mobil Travel Guide and diamond ratings from the American Automobile Association.
The Ritz-Carlton company has received all the major awards the hospitality industry and
leading consumer organizations can bestow. It is the first and only hotel company twice
honored with the Malcolm Baldrige National Quality Award from the United States
Department of Commerce. The Ritz-Carlton method is close attention to performance data
collection and a broad educational platform to deliver the findings.
In this report, we will study deeply about The Ritz-Carlton Company, the external and
internal performance of the company. We will try to describe the operation of company, to
analyze how the company uses the Malcolm Baldrige framework for self-assessment and then
improve himself to become excellent.
Additionally, we will examine the Malcolm Baldrige National Quality Award. How does
it impact the company both of benefit and potential problems in the next period after
receiving this award? We also make a recommendation regarding to the Malcolm Baldrige
model in order to face the future challenge of dynamic organization environment and
characteristic as well as the possibility of inappropriate approach of Malcolm Baldrige in this
case study.
2. The Malcolm Baldrige National Quality Award
The Malcolm Baldrige National Quality Improvement Act of 1987, signed into law on August
20, 1987, was developed through the actions of the National Productivity Advisory
Committee, chaired by Jack Grayson. The nonprofit research organization APQC, founded by
Grayson, organized the first White House Conference on Productivity, spearheading the
creation of the Malcolm Baldrige National Quality Award in 1987. The Baldrige Award was
envisioned as a standard of excellence that would help U.S. organizations achieve world-class
quality. In the late summer and fall of 1987, Dr. Curt Reimann, the first director of the
Malcolm Baldrige National Quality Program, and his staff at the National Institute of
Standards and Technology (NIST) developed an award implementation framework, including
an evaluation scheme, and advanced proposals for what is now the Baldrige Award. Three
important roles of the Baldrige award: to help improve organizational performance practices,
capabilities and results, to facilitate communication and sharing of best-practices information
among and within US organizations of all types, to serve as a working tool for understanding
and managing performance, and for planning and opportunities for learning.
The Baldrige award criteria framework includes seven categories: leadership, strategic
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planning, customer and market focus; measurement, analysis and knowledge management;
human resource focus; process management; business results. Each category within the
framework is itself split down into several criteria items or sub-categories and against each
examination item there is a list of areas to address. There are nineteen criteria items and thirty
two areas to address in total. The framework has three basic elements: organizational profile,
system operation, systems foundation. There are several important key concepts implicit in
the framework: focus on organizational results, being non-prescriptive and adaptable, systems
perspective, goal-based diagnosis. Category 7 deals with results. All results items are
concerned with trends and current performance of key organizational measures, together with
the performance of competitors and relevant benchmarks. The business results category
examines the organization’s performance and improvement trends in six key business areas:
customer-focused results, product and service results, financial and market results, human
resource results, organizational effectiveness results, and governance and social responsibility
results. The award process includes four stages: review, consensus and site-visit selection, site
visit, confirmation of awards. Scoring is the key to the evaluation process. The scoring system
has three design elements: it provides for assigning a numerical score to measure the degree
of attainment for each item on the Baldrige criteria, it provides a system that generates
essentially the same numeric scores when applied by independent examiners, it is based on a
three-dimensional scoring system.
In its development the Baldrige pays more attention on governance and ethics, the need
to capitalize on knowledge assets, the need to create value for customers and the business, and
the alignment of all aspects of the organization’s performance management system with
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results measurements. Criteria questions have been used to improve the Baldrige framework
as an assessment tool, and to identify gaps in approach, deployment and results. The award
promotes awareness of performance excellence as an increasingly important element in
competitiveness. It also promotes the sharing of successful performance strategies and the
benefits derived from using these strategies. To receive a Baldrige Award, an organization
must have a role-model organizational management system that ensures continuous
improvement in delivering products and/or services, demonstrates efficient and effective
operations, and provides a way of engaging and responding to customers and other
stakeholders. The award is not given for specific products or services.
3. Business Overview
The Ritz-Carlton competes against nearly 10 hotel groups in the “luxury” and “upscale,
deluxe” categories in the industry. Sales totaled almost $1.5 billion in 1998, with services
provided to meeting and event planners accounting for 40 percent of the total. Independent
business and leisure travelers constitute the next largest customer segment. More than 85
percent of the company’s 17,000 employees—known as “The Ladies and Gentlemen of The
Ritz-Carlton”—are front-line workers in hotels. Through extensive training programs and by
offering opportunities for professional development, the company encourages personnel to
advance in business process. Ritz-Carlton President and Chief Operating Officer Horst
Schulze began his career in the hospitality industry as a waiter’s apprentice at a hotel in
Europe.An independently operated division of Marriott International, Inc., since 1997, the
16-year-old company is headquartered in Atlanta.
3.1 Business Process
The Ritz-Carlton calls that something special "The Ritz-Carlton Mystique." It's a way of
conceptualizing the brand's image and the ambience of each of the company's more than 70
worldwide locations. "Mystique" sounds enigmatic, but it's achieved through the most
straightforward of methods: extremely close attention to performance data collection and a
broad educational platform to deliver the findings.
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The Blueprint
3.2 The flow chart for The Ritz-Carlton to get the award
The Ritz-Carlton Chronology of Performance Excellence
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4. Qualifier to Business Excellence
In literature, the Ritz-Carlton hotel by Horst Schulze and his time decided to personally take
change of managing of quality for the fundamental in 1983. The upper management
participation of Horst Schulze and his team ranged across a broad spectrum, but most
significant activities consist of defining the traits of all company products which are set out in
Credo and training the Credo into basic standard of clarify the quality responsibilities for
their Ladies and Gentlemen.
4.1 The Gold Standard of the Ritz-Carlton
The Gold Standard of the Ritz-Carlton is the most importance part to drive the
Ritz-Carlton to the world class hotel chain management. These standards consist of:
The Credo
The Basics
Three Steps of Service
Motto
Most Recent
By 1989 Horst Schulze realized that more comprehensive structure was necessary for the
Ritz-Carlton to optimize its performance. So he selected the Malcolm Baldrige National
Quality Award Criteria. The Ritz-Carlton receipted the Malcolm Baldrige National quality
Award in 1992, three years after applied. In the years following the award they actually
increased their involvement in both improvement and operation of their structured approach
to business excellence. The Ritz-Carlton developed a “roadmap” to business excellence which
has attained significantly higher performance level. A major ingredient of this approach was
involving people in planning of the work that affects them.
4.2 The Ritz-Carlton “Roadmap”
The Ritz-Carlton set up business excellence roadmap following the Malcolm Baldrige
National Quality Award Framework base on Deming cycle. The categories and items are show
below
Leadership
In this case, senior leaders play an importance role to define seven specific decisions to set
direction for business excellence as we show in above of the review. The senior leaders are
responsible to empowering those Ladies and Gentlemen to think and act independently. Two
index used to evaluate leadership effectiveness are employee satisfaction result and public
responsibility.
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Strategic Planning
Base on strategy of the Ritz-Carlton,
The Macro-Environment Analysis is used to create the Vital-Few objective for the next year.
The Objectives are designed to address the project gaps identified in the Macro Environment.
The monthly performance overviews of the strategic plan are conducted by upper manager at
the corporate and hotel level. The indicators of Vital-Few objectives are show in the table.
Customer and Market Focus
At the Ritz-Carlton, customer and market focus concentrates on information needed for hotel
development and operation. There are many needed resources such as market segment,
potential of the customer to research. They use CLASS database to store each type of
information. The 6P Concept is developed to lay the groundwork for process design.
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Information and Analysis
Two basic types of measurements are used at the Ritz-Carlton: organizational measurement
for upper managers at both the corporate and hotel levels, operational measurement for
planning, assessment and improving daily operations. The Production Quality Indicators
(PQI), Service Quality Indicator (SQI), and Benchmarking are used as analyzer’s tools.
Human Resource Focus
Senior Leader decides to increase both the meaning and satisfaction our people drive from
their work. The “Ladies and Gentlemen” know what they are supposed to do: learning and use
The Gold Standard, master the procedures of their job, and generate the ideas to improve the
product, services and process. The human resource approach is summarized as the picture
below.
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The most importance task of the Malcolm Baldrige National Quality Award is to make
organization learning. Of course the Ritz-Carlton gives people an education and training from
upper management until lower people employee. The training schedule was setup and requires
all employees to attend. After the training class evaluate is needed.
Process Management
Through their market research which concentrates on the quality of hotel development and
operations, the Ritz-Carlton conducted formal discussion between support and operations
employees and internal and external customers to identify hotel product and company mission.
The specific actions are taken to deploy their annual process management approach flow from
their strategic planning process to every day job level and category in their company.
Business Result
After the Ritz-Carlton implement the Malcolm Baldrige National quality Award Framework
to, the outcome is seem to be improved in all dimensional of all organization. In the
following table show the individual guest satisfaction by comparing to foremost competitors.
The overall satisfaction of the Ritz-Carlton is higher than foremost competitors. This is
show that customer satisfaction can improve by adopted the quality managing system
program into the organization. The financial result is one most importance to measure the
performance of the company. In this case the Ritz-Carlton has shown the higher percentage
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profit than other competitors from year 1996 to 1998 an going to be higher in year 1999.
In the view of human resource result, employee well-being and satisfaction is also
measured through their Employee Satisfaction Survey. The following table show key drivers
of overall employee morale and their respective responses for 1998.
Not only satisfaction of employee that have an excellence result but also effect to
decrease turnover rate and increase more people involved in planning. The literature also
shown the supplier and partner results and organizational effectiveness results which have
been improve continuously.
In this conclusion section, we discover some major points of inference which represent
the resolution of this case study. These major points have been classified into two perspectives
which are Ritz-Carlton point of view and the Malcolm Baldrige National Quality Awards
point of view.
Ritz-Carlton Point of View
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There are three critical success factors which are provided by Ritz-Carlton in order to
achieve excellence: 100% Employee Pride and Joy; Zero Customer Difficulties; and
100% Customer Loyalty. Regarding the critical success factors above, we can see the
main critical success perspectives was built upon human resources and customer focus.
In human resources focus, there are several key points were recognized as the underlying
approach. Based on human resources fundamental requirements, Ritz-Carlton tried to
build excellence work environments, and as a result, they want to provide skilled and
empowered workforce who do their job with joy and pride.
Human Resource Approach
In customer focus, Ritz-Carlton has major approach based on PDCA concept. This
approach has played an important role in order to achieve customer loyalty.
Customer Focus Approach
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Business Excellence award is not the end of the excellence journey. On the other hand,
Ritz-Carlton will face greater challenge after they got Malcolm Baldrige award to
maintain their excellence performance.
The Malcolm Baldrige National Quality Awards Point of View
The Malcolm Baldrige National Quality Award is a kind of tool or technique in order to
become an excellence organization. However, nowadays, we can see that organizations
have been already clustered into various kinds of characteristics. Thus, as a tool,
Malcolm Baldrige framework is suggested to be effectively used to get appropriate result
based on the particular objectives.
6. Recommendation
Recommendations have been for the improvement in the future period. Seems Ritz-Carlton is
classified as service firm. Several important points should be considered before access
business excellence framework which are:
Service Firm’s characteristic such as simultaneity, perishable, intangibility, heterogeneity,
and co-producer. Those characteristics have major influence to determine organization’s
driver in order to achieve their objectives.
People and leadership perspectives can be the most important role in this case study.
Thus, service firm with similar characteristic can pay more attention to those two
perspectives in order to become excellence.
Since there are many kinds of organizations, we realized that the Malcolm Baldrige already
tried to cover all of the kinds of characteristic such as specific indicators for general profit
organizations and not-for profit organization. On the other hand, non-profit organization is
also become the one of potential organization’s characteristic that should to be cover by the
Malcolm Baldrige. Non-profit which means no profit oriented at all from the business process
and in general, the capital has been gathered by the particular foundation. In addition,
regarding of various kinds of organization’s characteristics, fix weighted value from every
perspective from the Malcolm Baldrige framework may trigger inappropriate outcome
because it may against the original organization’s driver.