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 worlds 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 worlds 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 organizations 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 organizations 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 companys 17,000 employeesknown as The Ladies and Gentlemen of The Ritz-Carltonare 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 waiters 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.

The Blueprint 3.2 The flow chart for The Ritz-Carlton to get the award

The Ritz-Carlton Chronology of Performance Excellence 5


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.

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.

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 analyzers 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.


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 Firms characteristic such as simultaneity, perishable, intangibility, heterogeneity, and co-producer. Those characteristics have major influence to determine organizations 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 organizations 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 organizations characteristics, fix weighted value from every perspective from the Malcolm Baldrige framework may trigger inappropriate outcome because it may against the original organizations driver.

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