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The Quest for Quality Improvement: Using Six Sigma at Starwood

Hotels and Resorts

Article  in  International Journal of Hospitality & Tourism Administration · January 2012

DOI: 10.1080/15256480.2012.640212

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The Quest for Quality Improvement:

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DOI: 10.1080/15256480.2012.640212

The Quest for Quality Improvement: Using Six

Sigma at Starwood Hotels and Resorts

DAVID M. PEARLMAN and HARSHA CHACKO

School of Hotel, Restaurant and Tourism, University of New Orleans,
New Orleans, Louisiana, USA
Downloaded by [David M. Pearlman] at 09:38 06 February 2012

In 2001, Starwood Hotels and Resorts announced that it would

be the first hospitality company to embrace Six Sigma, a qual-
ity improvement program where the development and adoption
of innovative customer-focused solutions were to result in improv-
ing the quality and consistency of guests’ experiences and lead to
enhanced financial performance. The purpose of this article is to
illustrate this process improvement program and to document the
application of Six Sigma within the hospitality industry. Findings
indicated an increased use of cross-functional team approaches,
effective use of expanded stakeholder partnerships, and the adop-
tion of objective techniques and statistical testing to solve problems
and improve the bottom line.

KEYWORDS quality improvement, Six Sigma, Starwood

INTRODUCTION

“Quality is never an accident, it has to be visioned, initiated, planned,

delivered, monitored, and sustained . . . a successful quality assurance
system must achieve the goals of boosting employee morale, maximizing
guest satisfaction, and optimizing long-term profitability” (Pallet, Taylor, &
Jayawardena, 2003, p. 349). According to Pallet et al. (2003), the service sec-
tor, notably the hotel industry, has yet to embrace internationally accepted
quality systems unlike the manufacturing sector. Traditional manufacturing

Received January 13, 2009; accepted October 26, 2009.

Address correspondence to David M. Pearlman, School of Hotel, Restaurant and Tourism,
University of New Orleans, 2000 Lakeshore Dr., New Orleans, LA 70148, USA. E-mail:
dpearlma@uno.edu

48
 Six Sigma at Starwood 49

firms have embraced many process improvement programs from inspection

to total quality management (TQM), ISO 9000, and then to Six Sigma.

LITERATURE REVIEW

During the 1980s and 1990s, corporations rushed to implement TQM pro-
grams. It has been almost three decades since this initiative got started, yet
despite its popularity the TQM movement has had many critics questioning
whether it is a legitimate management practice that offers tangible benefits
for organizations. Several studies have documented the economic and finan-
cial contributions that the implementation of quality improvement programs
has had on companies (Hendricks & Singhal, 1997, 2001; Easton & Jarrell,
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1998; Corbett, Montes-Sancho, & Kirsch, 2005).

Further, while these critics question claims that the implementations of
TQM programs improve the operating performance of firms, Hendricks and
Singhal (1997) found that firms that have won quality awards outperform the
control firms on operating income-based measures. Specifically, they found
that over a 10-year period from 6 years before to 3 years after the year of
winning the first quality award the mean change in operating income for the
test sample was 48% higher than that of the control sample. This study also
had reasonably strong evidence that firms that have won quality awards do
better on sales growth than the control firms over the same 10-year period;
the mean change in sales for the test sample was 24% higher than that of
the control sample. Easton and Jarrell (1998) examined the impact of TQM
on the performance of 108 firms that began TQM implementation between
1981 and 1991. They measured the impact of TQM by comparing each firm’s
performance to a control benchmark designed to capture what the perfor-
mance would have been without TQM. Findings indicated that effective
TQM implementations improved long-term profitability and stock returns.
In 1986, the ISO 9000 series of quality management systems standards
were introduced. ISO 9000 is a family of standards for quality manage-
ment systems as maintained by ISO, the International Organization for
Standardization, and is administered by accreditation and certification bod-
ies. Some 20 years later it has been adopted by over 560,000 locations
worldwide (Corbett et al., 2005). Corbett et al. (2005) found that firms
can achieve internal benefits such as quality or productivity improvements,
and/or that certification can help firms maintain or increase their market
share. More specifically, they found that the firms’ decision to seek their first
ISO 9000 certification was followed by improved financial performance.
Motorola first created Six Sigma, a quantitative approach that drives
improved effectiveness and efficiency in an organization, in the 1980s. In the
1990s, it was adopted by AlliedSignal (now Honeywell), Ford, American
Express, General Electric, and others, eventually resulting in the savings of
 50 D. M. Pearlman and H. Chacko

millions of dollars and making Six Sigma the most popular quality improve-
ment methodology in history (Eckes, 2001). Today Six Sigma is used as an
all-encompassing business performance methodology all over the world, in
organizations as diverse as local government departments, prisons, hospitals,
the armed forces, banks, and multinational corporations.
The roots of Six Sigma go back to the 1970s when Dr. Mikel Harry,
a senior staff engineer at Motorola, began focusing on Edward Deming’s
concept of process variation and searching for ways to reduce variation and
lower the defect rate in the manufacturing process. These variations, when
measured statistically, are the standard deviation around the mean, repre-
sented by the Greek symbol sigma, or  (Eckes, 2001). After Motorola
kicked off their Six Sigma initiatives, dramatic improvements were seen
within the first year and in 1987, Motorola’s sales were up 23% and profits
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were up 44% to $445 million (Snee & Hoeri, 2003). It is estimated that since
1987, Motorola has saved $16 billion as a result of of Six Sigma implemen-
tation (Bruce, 2005). According to Marx (2007), Six Sigma implementation
among Fortune 500 companies has resulted in over $400 billion in savings
since 1987, and that of the top 500 public companies in the United States,
53% have deployed Six Sigma to some degree. Those Fortune 500 compa-
nies with the largest revenues are more likely to have a Six Sigma initiative
with 82% of the top 100 companies using the methodology, and only 27% of
the bottom 100 companies used Six Sigma. Of the 47% of Fortune 500 com-
panies that have not yet embraced Six Sigma, estimates indicate that that
these companies may represent some $500 billion that could potentially be
saved through the implementation of these business practices (Marx, 2007).
Buying services is different than buying consumer products. Customers
experience a perceived greater risk when buying hospitality and tourism
services than when buying products (Zeithaml, 1981); therefore, many firms
seek to reduce customer-perceived risk. Service guarantees have gained con-
siderable support and increased use among many organizations to reduce
customer risk and to obtain a differential advantage from the competition.
Over 15 years ago, McDonald’s President Ed Rensi declared, “if you’re not
satisfied, we’ll make it right and your next meal is free” (Prewitt, 1992,
p. 22). Currently, in the hypercompetitive business climate companies use
service guarantees to keep business. FedEx offers a money-back guarantee
for every US shipment. If they miss their published (or quoted, as in the case
of FedEx SameDay) delivery time by even 60 seconds, you may request a
refund or credit of your shipping charges and this guarantee applies to all
US shipments, commercial and residential, to all 50 states (FedEx, 2009).
Yancey (2007) tested the Gaylord Hotels room service guarantee, where if
your order takes more than 30 minutes to arrive it is free; at the Gaylord
Palms Resort & Convention Center outside Orlando, Yancey’s eggs and juice
showed up at exactly 29 minutes and 30 seconds. Using service guarantees
as a point of differentiation does have economic consequences; therefore
 Six Sigma at Starwood 51

to some operations a few minutes’ difference in operational performance is

significant and worthy of some organizational resources. This is where the
application of TQM, including Six Sigma, enters the picture.
Traditionally, manufacturing firms have embraced these quality
improvement programs with their roots coming from product inspections.
RSM McGladrey, Inc. (McGladrey, 2006), a top professional services firm
providing accounting, tax, and business consulting, noted that government
services were one of the fastest growth areas for quality improvement
programs. Further, they noted that while only a handful of service-based
companies such as FedEx, McDonald’s, UPS, and Wal-Mart have developed
almost legendary process-improvement programs, the industry as a whole
has lagged behind substantial gains made in the manufacturing sector over
the past two decades. In fact, according to the federal Bureau of Labor
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Statistics, individual worker productivity in manufacturing plants doubled

between 1980 and 2000, while employee efficiency in service-based busi-
nesses improved by only 22% during that same period; this late-blooming
trend in services comes as no surprise (McGladrey, Inc., 2006).
Hendricks and Singhal (2000) investigated the characteristics of firms
that implemented a TQM program including their financial performance, tim-
ing of implementation, and organizational size and industry sector. Results
indicated that it was never too late to invest in TQM programs because
they did not see any significant differences between the performance of ear-
lier and later implementers of effective TQM initiatives, which includes Six
Sigma, among others.
On February 5, 2001, Starwood Hotels and Resorts (hereafter, Starwood)
Chairman Barry Sternlicht said, “the launch of Six Sigma is one of the
most important strategic initiatives since the formation of our company”
(StarwoodHotels and Resorts, Inc., 2001, p. 1). Although many major corpo-
rations had used Six Sigma for over a decade, this marked the first time Six
Sigma was to be adopted by the hospitality industry. By applying the prin-
ciples found in Six Sigma, many service-focused companies reduced waste
in internal processes and improved customer relations metrics (Sehwall &
DeYong, 2003); however, as of the date of this publication, Starwood was
the first of a very short list of hospitality organizations to embrace Six Sigma,
while the later adopters have embraced some aspects of this specific quality
improvement programs. Six Sigma has facilitated the development of innova-
tive customer-focused solutions and cost savings; in 2006, programs yielded
more than $100 million in profit to Starwood’s bottom line (Ante, 2007a).
Further, their program encourages widespread organizational adoption of
solutions (best practices) resulting in improving the quality and consistency
of guests’ experiences.
The purpose of this article is to illustrate this quality improvement pro-
gram among several others that are practiced in the hotel industry. This case
study documents the application of Six Sigma within Starwood because its
 52 D. M. Pearlman and H. Chacko

benefits (including an increased use of cross-functional team approaches),

effective use of expanded stakeholder partnerships, and adoption of objec-
tive techniques and statistical testing to solve problems and improve the
bottom line may be adopted by other hospitality service providers.

Purpose of the Study

Hospitality and tourism businesses are very complex and their performance
is affected by many factors including the global economy, competition,
societal trends, labor supply, operational efficiency, and technological acu-
men. This complexity makes it difficult to identify, with certainty, specific
operational “cause-and-effect” relationships that result in overall corporate
profitability. Further, the collection of the many data points required for
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many statistical tests is difficult due to corporate confidentiality policies.

The purpose of this study is to illustrate Starwood’s utilization of Six Sigma,
specifically, to document its implementation and its effectiveness. An in-
depth case approach was used for this study and it has the following
purposes:

1. To briefly examine quality improvement programs used by major hotel

companies;
2. To explain the basics of Six Sigma and its applications; and
3. To look at a specific implementation of Six Sigma in the hotel industry.

METHODS

This was an exploratory study and used qualitative research methods to

achieve its objectives. Qualitative research is unstructured, exploratory in
nature, based on small samples, and may utilize techniques, such as pilot
surveys, focus groups, and case studies (Babbie, 1986). Case study was used
as part of this research methodology. Case studies involve an intense exam-
ination of a few select cases of the phenomenon of interest. In this case, the
application of Six Sigma practices within Starwood was examined.
The data for this research was obtained from the company, exter-
nal secondary sources, and by conducting lengthy unstructured interviews.
Specifically, the data were collected through both an exhaustive review of
hotel industry literature collected from a variety of sources including annual
reports, Web sites, and academic literature. Further, personal interviews
conducted with two directors of Six Sigma for Starwood provided insight per-
taining to implementation practices throughout the organization. Specifically,
there were two series of personal interviews, the first in November 2002
(E. Shapard, personal communication, November 2002) and the second in
August 2006 (M. Andry, personal communication, August 2006). The first
 Six Sigma at Starwood 53

series consisted of three face-to-face interviews (November 5th, 13th and

25th, 2002) for a total of approximately 3 hours in duration, while the
second respondent was interviewed at four separate meetings (August 4th,
7th, 16th and 29th, 2006) for approximately 3.5 total contact hours. For the
2006 interviews, first a six-page interview schedule was sent to the study
respondent, and then upon completion of this comprehensive questionnaire
the face-to-face interview was scheduled.
Qualitative research provides insights and understanding of the problem
or phenomena of interest (Malhotra, 2007). Case study analysis was used to
obtain a deeper understanding of Starwood’s implementation and practices
regarding its use of this quality improvement process; this study documents
how Starwood’s adoption and implementation of Six Sigma is possible and
effective within service industries, specifically hospitality entities.
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Quality Improvement Programs in the Hotel Industry

Many US manufacturing businesses adopted the principles of TQM in the late
1980s; in 1987, the US Congress established the Malcolm Baldridge Quality
Award to recognize companies who excelled in quality improvement. One
of the only hospitality companies to strive for and achieve this award was the
Ritz-Carlton Hotel Company. Then-CEO Horst Schulze, whose team of top
executives met each week to review indicators of quality including guest sat-
isfaction, organizational growth and development, and profits, pushed their
approach to TQM (Partlow, 1993). Ritz-Carlton Hotels established quality
standards for most vital processes that were needed to achieve guest satis-
faction and created detailed plans for implementation. A quality leader was
appointed to lead teams at each hotel and quality data were collected daily,
including information on customer satisfaction, percentage of check-ins with
no queuing, and time taken by housekeepers to clean a guest room, among
others. Data were tabulated to identify trends and measures were taken
to address process variations and thereby increase guest satisfaction. These
efforts led Ritz-Carlton Hotels to become the first hotel company to win the
Malcolm Baldridge Award in 1992 and again in 1999.
By the 1990s, Hilton Hotels started using a method known as the
Balanced Score Card to examine and maximize “value drivers” that balanced
financial information with other measures, including customer satisfaction
and brand image, with a goal of increasing stakeholder returns (Huckestein
& Duboff, 1999). Hilton Hotels identified the value drivers to be operational
efficiency, revenue maximization, value proposition, and brand manage-
ment. Each hotel created and measured key performance indicators for
each value driver and added continuous goals and processes incorporat-
ing the use of various quantitative tools. All these activities became part of
a program called Enterprise Performance Management that allowed Hilton
to implement corporate strategies at operational levels. In reviewing the
 54 D. M. Pearlman and H. Chacko

aforementioned programs, one can begin to see an emerging vocabulary

of terms and procedures associated with each of the organizations’ quality
improvement programs.

What is Six Sigma?

Six Sigma is a rigorous and disciplined methodology that uses data and statis-
tical analysis to measure and improve a company’s operational performance
by identifying and eliminating “defects” in manufacturing and service-related
processes (Eckes, 2001). Six Sigma identifies and aligns improvement ini-
tiatives with strategic objectives and business goals while reviewing key
processes that drive an organization. In 1982, Motorola was the first US
company to develop the Six Sigma methodology when one of its executives
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began studying the work of W. Edwards Deming on process variation as

part of quality control. This approach to quality assurance had been used by
the Japanese car industry for decades but was completely new to the West,
where the approach was one of mass inspection for defects once a part had
been produced. Initially, manufacturing companies striving to improve the
production process adopted Six Sigma; however, it has been increasingly
adopted by the services sector (Kumi & Morrow, 2006).
The foundation of Six Sigma begins when quality, as defined by the cus-
tomer, is examined in order to focus on the requirements and expectations
that are truly critical and measureable. Simply put, if there is an output (e.g.,
an overnight stay in a hotel or the production and delivery of a telephone-
placed pizza order) then there is a process. In any process, there are likely
to be performance variations (e.g., the room is dirty or the television does
not work; the wrong ingredients are on the pizza that was delivered a half
hour late). If there are variations then there is a probability of defect (e.g.,
missing our customers’ specifications or needs). The customer recognizes
these process output variations and uses them in the perception of an orga-
nization’s quality (Eckes, 2001). These process variations can also be seen
as service defects.
In order to conform to Six Sigma standards, only 3.4 defects per million
service opportunities are permitted. On the other hand, a process operating
at Three Sigma produces 66,807 defects per million service opportunities.
To further illustrate this concept, if the airlines operated at Three Sigma
there would be 964 US flight cancellations per day compared to one US
flight getting cancelled every 3 weeks in a world operating at Six Sigma
(Garrison, 2005). This is a very ambitious process improvement goal.
In simple terms, the concept of Six Sigma is to measure current per-
formance and to determine the number of standard deviations away from
the mean where the variation in a core process results in customer dissat-
isfaction. The purpose of Six Sigma is to gain breakthrough knowledge on
how to improve processes to do things better, faster, and at lower cost.
 Six Sigma at Starwood 55

An example of hypothetical room service delivery times is used to illustrate

the concept of Six Sigma (Figures 1 and 2).
In Figure 1, the distribution of room service delivery times shows a
mean of 26 minutes, where the unacceptable time is 30 minutes or above
at approximately Three Sigma (three standard deviations away from the
mean). Figure 2 shows that, with improved efficiency, delivery times are
an average of 23 minutes with less variability (as shown by the steeper
curve) and 30 minutes is now at the Four Sigma level. These Sigma levels
are considered levels of perfection and can be converted into a measure
named, defects per million opportunities.
The Six Sigma method has five phases: (a) define, (b) measure, (c)
analyze, (d) improve, and (c) control, also known as DMAIC (Chowdhury,
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Mean

+1s

+2s

+3s

Average Delivery time

delivery time of 30 mins. at
of 26 mins. 3s

FIGURE 1 Room service delivery time example.

Mean

+1s

+2s

+3s

+4s

Average Delivery time

delivery time of 30 mins. at
of 23 mins. 4s

FIGURE 2 Room service delivery time example with delivery times clustered closer to
the mean.
 56 D. M. Pearlman and H. Chacko

2001). These phases are implemented by a team, consisting of staff from

various levels of the organization that are responsible for addressing specific
projects that have been preselected for improvement.

● Define: Defining the team to work on improvement; defining the cus-

tomers (either internal or external) of the process, their needs, and
requirements; and creating a map of the process to be improved.
● Measure: Identifying key measures of effectiveness and efficiency and
translating them into the concept of sigma.
● Analyze: Through analysis, the team can determine the causes of the
problem that needs improvement.
● Improve: The sum of activities that relate to generating, selecting, and
implementing solutions.
● Control: Ensuring that improvement sustains over time.
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While conducting the literature review, it became evident that many

organizations were implementing some sort of quality improvement pro-
gram. However, it also became evident that many of the organizations used
the terms and structure of Six Sigma, which is actually a registered trade-
mark of Motorola, Inc. Chapman (2009) traced the origin and history of Six
Sigma, and found that it has widely become used as a “generic” term with
many different meanings and interpretations; he also stated that Six Sigma is
still “evolving.” Hindo (2007) said that the term was so divergently applied
that it is hard to pin down what Six Sigma actually means. He indicated
that at some companies, Six Sigma is plainly a euphemism for cost cutting
while others see it as a tool for analyzing a problem and then using data
to solve each element of it; however, on a basic level, Six Sigma seeks to
remove variability from a process that, in turn, increases predictability. All
such approaches of quality improvement, whether they are called TQM, ISO
9000, Six Sigma, or the “lean production” process invented by Toyota share
a core set of principles that, when applied, achieve quality goal and lead a
company to high performance.

Six Sigma at Starwood

Starwood is one of the leading hotel and leisure companies in the world with
approximately 850 properties in more than 95 countries and 145,000 employ-
ees at its owned and managed properties. Starwood is a fully integrated
owner, operator, and franchisor of hotels and resorts with the following
internationally renowned brands: St. Regis, The Luxury Collection, Sheraton,
Westin, Four Points by Sheraton, W, Le Méridien, and the recently announced
aloft (Starwood Hotels and Resorts Worldwide. Inc., 2007). In 2007, Geoff
Ballotti, President of Starwood North America, said that the company is using
Six Sigma’s strengths to promote innovation and generate tens of millions
 Six Sigma at Starwood 57

in new revenue by combining creativity and efficiency, and in 2006, pro-

grams developed under Six Sigma delivered more than $100 million in profit
to its bottom line (Starwood Hotels and Resorts Worldwide, Inc., 2007).
Starwood believes that Six Sigma “enables associates to develop innova-
tive customer focused solutions” and then transfers identified innovations
across the organization to improve the quality and consistency of guests’
experiences (StarwoodHotels and Resorts Worldwide, Inc., 2001, p. 1).
The White Plains, NY-based company is one of the world’s most prof-
itable hotel operators with a net income margin in 2006 of around 17%,
higher then key competitors Hilton and Marriott (Starwood Hotels and
Resorts Worldwide, Inc., 2007). Since the program was launched in 2001,
150 employees have been trained as “black belts” (managers who work full
time on Six Sigma projects) and more than 2,700 as “green belts” (managers
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who have a portion of the service time allocated to Six Sigma projects).
Based mostly at the hotels, black belts oversee the projects while green
belts formulate the details and the key to their success.
According to the vice president of Six Sigma, Six Sigma specialists,
instead of acting like “suits” imposing their will from the corporate office,
operate more like partners who help local hotels meet their own objec-
tives since almost 100% of the creative concepts come from in-house staff.
Furthermore, every project must be overseen by a hotel employee: “by
focusing on their goals and budgets it enables us to become a partner in
the operation” (Ante, 2007b). By the middle of 2005, Starwood had run
3,000 to 4,000 projects worldwide in areas such as productivity, menu
redesign, resort concierge, e-mail marketing, and launching a worldwide
sales initiative (Ante, 2007b).
The innovation process begins when hotel teams pitch a new idea to
the Six Sigma Council composed of Ballotti and his 13 direct reports who
evaluate an idea’s merit based on the division’s priorities and the project’s
expected payoff. If the council approves a project, black belts and green
belts at the hotels carry out the project (Ante, 2007a). Green belts use the
proprietary “E-Tool,” which is a Web-based system that allows Starwood
to monitor many performance metrics to gauge the success or failure of
a new project. E-Tool lets hotel managers rapidly disseminate information
to drive consistent execution of each project. Currently, Starwood rolls out
new projects every 2 weeks and the green belts enter every project into the
E-Tool, which currently contains 3,000 to 4,000 entries (Ante, 2007a). The
detailed entries in the E-Tool include photographs and project descriptions
as well as how-to instructions. One manager interviewed in the Business
Week article (Ante, 2007b) indicated that he probably makes 50% fewer
mistakes than if he had rolled out a project independent of the E-Tool and
the Six Sigma team.
Some projects lead to big cost savings and a healthier workplace. For
example, consider a hotel safety effort that was made mandatory for all
 58 D. M. Pearlman and H. Chacko

North American hotels; Starwood launched the initiative in early 2004 after
executives noticed that workers’ compensation claims were skyrocketing.
A Six Sigma team researched the problem and discovered the biggest causes
of accidents were slips and falls, and housekeepers often suffered from back
strains. The team developed new work processes, including a stretching
routine required for all housekeepers and new cleaning tools with longer
handles. In the past 3 years, Starwood has slashed the number of workers’
claims in half, and their cost has fallen 69% (Ante, 2007b).
The previous example involved the use of several quality improvement
tools. These tools (see Table 1) are used to aid in data collection and con-
solidation, problem definition and/or resolution, pattern or trend analysis,
and process analysis (Snee, 2004).
One of these tools, the cause-and-effect diagram, is an analysis tool that
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provides a systematic way of looking at effects and the causes that create
or contribute to those effects. It is also called a fishbone diagram, which
is a graphical method for finding the most likely causes for an undesired
effect (e.g., skyrocketing workers compensation claims). Figure 3 shows a
sample fishbone diagram that investigates the possible reasons for a hotel
room service order to be delivered late to a customer. The labeling scheme
developed for categorizing the root causes of the problem could be methods,
material, equipment, and people.
Another Six Sigma effort was an initiative to drive down the company’s
energy costs. In order to understand the reasons for increased energy costs

TABLE 1 Six Sigma Tools

Process Map A schematic of a process showing process inputs, steps and

outputs.
Cause and Effect A prioritisation matrix that enables you to select those processes
Matrix input variables that have the greatest effect on the the process
output variables.
Measurement System Study of the measurement system typically using Gage R&R studies
Analysis to quantify the measurement repeatability and reproducibility.
Capability Study Analysis of process variation versus process specifications to assess
the ability of the process to meet the specifications.
Failure Mode and Analytical approach for identifying pocess problems by prioritising
Effects Analysis failure modes, their causes and process to meet the specifications.
Multi-vari Study A study that samples the process as it operates and by statistical
and graphical analysis identifies the important controlled and
uncontrolled (noice) variables.
Design of A method of experimentation that identifies, with minimum testing,
Experiments how key process input variables affect the output of the process.
Control Plan A document that summaries the results of a Six-Sigma project and
aids the operator in controllig the process.
Pareto Charts A bar chart arranged in descending order with a line graph
showing the cumulative totals of each category, left to right often
representing sources of defects.
Note. Adapted from Snee (2005).
 Six Sigma at Starwood 59

Equipment People

High turnover
Insufficient carts
Unreliable elevators Untrained workers

Cannot handle peak periods Order errors

Inexperienced workers
Poor kitchen equipment
Low wages

Late room
service delivery
Not enough
silverware
Not enough workers
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Cannot handle
Food not ready peak periods

Inexperienced workers
Raw material not available
Low wages
Inconsistent
Methods supplier
Materials

FIGURE 3 Fishbone diagram: Room service.

Six Sigma tools were utilized, possibly a Pareto chart. A Pareto chart is
another tool and is a series of bars whose heights reflect the frequency
or impact of individual factors influencing the problem area. The bars are
arranged in descending order of height from left to right, which means
the categories represented by the tall bars on the left are relatively more
significant than those on the right. The chart gets its name from the Pareto
principle, which postulates that 80% of the trouble comes from 20% of the
problems. Also using the room service example, Figure 4 presents a Pareto
chart and shows that late delivery accounts for most of the complaints from
hotel guests.
After the root causes of defects (service variations) have been defined,
analyzed, and measured, alternative solutions can be formulated to improve
the process so that variations are reduced (i.e., statistically, the standard
deviation becomes smaller and the distribution shows less variability around
the mean) and customers are more satisfied.
The next step after the identification of Six Sigma-based solutions at
Starwood was the development of an in-house program that disseminates
best practices company-wide. For example, the processes identified as best
practices for energy conservation were expected to cut Starwood’s power
bill by about $11 million (Ante, 2007b). Part of this energy reduction pro-
gram required hotels to replace incandescent lights with compact fluorescent
bulbs in 75% of their rooms. There was resistance from hotel staff who felt
 60 D. M. Pearlman and H. Chacko

250 100%
92% 94%
75% 84%
200

150

100

50

0
Late Incorrect Cold food Poor Other
delivery order quality
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FIGURE 4 Pareto chart: Room service complaints.

the new bulbs would not throw off such a pleasing light. Nevertheless, a Six
Sigma group calmed those concerns by setting up a dozen rooms with dif-
ferent bulbs for testing preferences. Further, electrical lighting manufacturers
were included in the process to figure out the best solutions (Ante, 2007b).
This finding documents that the value of expanded stakeholder relationships
can improve quality improvement project results.
Six Sigma would not succeed without strong support at various levels of
the organization, starting at the top with Barry Sternlicht (former CEO) fol-
lowed by the vice presidents, whose goals have a long-term focus including
such objectives as improving market share and profitability and maintaining
long-term viability. These executives are also known as “master black belts.”
Next are the “project champions” at the operational level (i.e., general man-
agers of hotels). These are followed by the black belts, whose full-time
role is to guide and implement Six Sigma from project selection through
all steps in DMAIC; and finally the green belts, who are line-level supervi-
sors and key employees responsible for the day-to-day processes of the Six
Sigma projects. At Starwood, full-time black belt positions have been cre-
ated for every hotel over 450 rooms, while green belts handle these duties
at smaller hotels.
The goal for each black belt is to drive earnings before fixed costs of
$200,000 per year, thus justifying their positions at the hotels (E. Shapard,
personal communication, November 2002). The required stating of dol-
lar value goals for each project is another difference between Six Sigma
and other quality improvement initiatives, such as TQM. Starwood has also
decided that black belts will maintain their positions for only 2 years, after
which they will be returned to traditional operations management functions;
this is done to prevent them from viewing their jobs as dead ends or from
falling into a rut.
 Six Sigma at Starwood 61

Six Sigma has been used to launch another Starwood initiative dubbed
“unwind” to create a set of activities that would bring hotel guests out of their
rooms to meet and mingle with other guests and to relax. This was based
on surveys that found that 34% of frequent travelers felt lonely when they
were away from home. Innovative ideas were created at various Starwood
hotels all over the world including activities such as origami lessons (Japan),
whiskey tasting (Scotland), candle-lighting ceremony (Malaysia), Tai Chi and
watercolor painting (China), and free massages in the hotel lobby (Chicago;
Ante, 2007a).
A project charter is the first step in the Six Sigma methodology at any
given Starwoodhotel. This takes place in the “define” step of DMAIC, and the
charter can make or break a successful project. It can make it by specifying
necessary resources and boundaries that will in turn ensure success; it can
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break it by reducing team focus, effectiveness, and motivation. Project imple-

mentation usually involves 18-member teams led by a black belt (director of
Six Sigma), green belts (department managers who have a stake in the pro-
cess), and other employees. Corporate support is significant and includes
training and the use of proprietary intranet applications. Starwood holds
weekly Six Sigma teleconferences and the intranet site contains statistical
support and “designed best” practices for review and unit implementation.
According to Starwood policy, a black belt’s resources could be directly
involved with two to four Six Sigma projects per year. Management teams are
presented with options as to where improvements are needed and they vote
to assess problems and rank priorities for Six Sigma projects. All Starwood
associates are encouraged to identify problems to apply Six Sigma principles,
but in many cases employees may not always be aware of the process.
Six Sigma projects can be expensive and costs include labor, intranet
maintenance, travel, and other expenses. Therefore, projects are ranked
based on the potential benefits that should result when the projects are
completed. Two of the major Six Sigma project benefits are (a) results seen
on the profit and loss statement and (b) increased production and more-
satisfied employees. The decision making processes that Starwood employs
to rank Six Sigma projects for implementation may include: (a) cost savings,
(b) revenue potential, (c) reduced turnover, and (d) increased customer sat-
isfaction. Each project is ranked similarly; however, individual project teams
and stakeholders change based on project needs. Usually, Six Sigma project
implementation teams consist of department heads, subject matter experts,
and cross-functional department staff.

PROJECT EXAMPLE : REDUCE ENERGY CONSUMPTION

The project example presented here specifically dealt with the reduction
of monthly energy bills. The project team consisted of vendors (of energy
consuming appliances), utilities providers, and department utility users (i.e.,
 62 D. M. Pearlman and H. Chacko

director of housekeeping, director of stewarding, and director of food & bev-

erage), three green belts, and one black belt. Project objectives included the
reduced consumption by customers of kilowatt-hours per month as well as a
percentage decrease in annual electricity expenses. This project was imple-
mented in two phases lasting a total of 12 months. Phase 1 included learning
about HVAC systems, laundry systems, and the awareness and implemen-
tation of utility consumption monitoring software, while Phase 2 was the
monitoring of the results of the tactical modifications designed/implemented
to reduce overall energy consumption.
In order to meet the objectives of this Six Sigma project, data needs
included energy use patterns, individual consumption rates of major users,
and knowledge of HVAC systems. Candid discussions with various internal
and external stakeholders (e.g., energy company executives) yielded a better
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understanding of how utility charges were assessed. Additionally, the local

electric company gave the Six Sigma team a computer program that permit-
ted the monitoring of energy consumption patterns; with the use of this soft-
ware the project team monitored kilowatt-hour consumption in 15-minute
intervals. The knowledge obtained from these stakeholder relationships can
yield a competitive advantage—reduction of the cost of goods sold.
Electricity bill calculations are complex and may include standing
charges (some suppliers charge a fixed daily charge, regardless of how much
is used); unit rates (these are the costs of using one unit or kilowatt-hour of
gas or electricity); and consumption thresholds/hours of use (some suppli-
ers charge a different unit rate depending on usage patterns). The Six Sigma
team found that the energy bill depends not only on how much energy you
use, but also on when it is used. For example if electricity is used during
peak hours—weekdays between 10:00 a.m. and 6:00 p.m. or in summer
when demand is heavy—the rates are higher. In some cases, monthly bills
are based on total kilowatt-hours consumed multiplied by a variable multi-
plier which depends on consumption thresholds (i.e., higher kilowatt-hour
rates for usage during peak times).
Using the Six Sigma tools previously mentioned, including fishbone dia-
grams, Pareto charts, and control charts, a better understanding of the root
causes for the higher than desired energy expenses (e.g., gas, water/sewage,
electricity) was possible. Data analysis revealed that the nighttime cleaning
crew’s usage of the elevators was the primary event that spiked consump-
tion, which resulted bill calculations based on higher consumption patterns
(i.e., higher use levels dictated higher kilowatt-hour multipliers in rate cal-
culations). Simply put, elevator use at midnight (crew changes) spiked
electricity use at a time when hotel guests also had an increased use of
air conditioning, and the charges were based on this abnormally high usage
level. So in order to lower monthly utility expenses, the property would have
to lower its peak consumption level, which was what the utility company
used to assess rate calculations.
 Six Sigma at Starwood 63

Armed with this new information, the hotel again worked with its stake-
holders to assist in practices that would change current operations, ultimately
changing utility consumption peak-usage levels. Changes in cleaning opera-
tions’ start time and workflows throughout the building successfully reduced
energy consumption levels to predetermined project objectives.
This Six Sigma project aimed to improve energy bills, and in doing so, a
number of resolutions were prescribed based on the findings that emerged
with the use of this process improvement method. Six Sigma was valuable
in that it focused attention on what the problem was instead of assumptions
about what the problem might be. In this way, time and resources were
aimed at fixing what was actually wrong instead of what was assumed to
be wrong.
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Benefits of Six Sigma

As stated earlier, the competitive nature of the industry requires compa-
nies to employ proprietary operational practices. Therefore, it was not
possible to obtain the cost savings or revenue gains from specific Six
Sigma projects at Starwood and no cost benefit analysis could be done
for this article. However, data were found through public sources that per-
mitted the comparison of the financial performance of three major hotel
companies—Starwood, Marriott, and Hilton—and are found in Table 2.
Table 2 shows the comparisons of revenues, net income, and net
income margin of these companies for the years 2001 through 2006. While
revenues may be dependent on various factors such as number of hotels
in the chain, mergers and acquisitions, and other factors, the net income
margin is a measure of the performance effectiveness of a company after
considering expenses. Table 2 shows that Starwood outperformed Hilton

TABLE 2 Comparison of Revenues, Net Income, Net Income Margin (2001–2006; in $

Millions)

Company 2001 2002 2003 2004 2005 2006

Starwood
Revenues 4,633 4,588 4,630 5,638 5,977 5,979
Net income 145 355 309 395 422 1,043
Net income margin 3.13% 7.74% 6.67% 7.01% 7.06% 17.44%
Marriott
Revenues 7,768 8,415 9,014 10,099 11,550 12,160
Net income 236 277 502 596 669 608
Net income margin 3.04% 3.29% 5.57% 5.90% 5.79% 5.00%
Hilton
Revenues 3,952 3,816 3,819 4,146 4,437 8,162
Net income 166 198 164 238 460 572
Net income margin 4.20% 5.19% 4.29% 5.74% 10.37% 7.01%
Source: Annual Reports of Starwood, Marriott, and Hilton 2001–2006.
 64 D. M. Pearlman and H. Chacko

every single year since 2001 and bettered Marriott 5 out of the 6 years from
2001 to 2006. Naturally, there may be other factors besides Six Sigma that
were the cause of this, but at least some gains may be attributed to this
quality improvement program that was begun in 2001.

CONCLUSION

Six Sigma is a quantitative approach that attempts to drive improved effec-

tiveness and efficiency in an organization. This case study documents the
application of Six Sigma within Starwood, including an increased use of
cross-functional team approaches, effective use of expanded stakeholder
partnerships, and the adoption of objective techniques and statistical testing
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to solve problems and improve the bottom line. As a result of these benefits,
Six Sigma may be adopted by other hospitality service providers.
Throughout the hotel industry, quality improvement is considered the
key ingredient to success. In search of performance management excellence,
Hilton Hotels has implemented a balanced scorecard that incorporates rev-
enue maximization, operational effectiveness, and brand management. The
culture at Marriott International, Inc. prides itself on its reputation for supe-
rior customer service: “people serving people.” Continuous improvement
programs have changed and matured over the years. Several theories and
methodologies have been introduced, with some finding wide popularity.
Starwood became the first and still is the only hospitality company to
embrace Six Sigma, and the company believes that this quality improvement
program has enhanced employee efficiency and customer satisfaction; these
are crucial in an industry where customer interactions occur on an hourly
basis, and each customer touch-point is critical for building personalized
service credibility.
The reviewed literature along with Starwood’s successful implemen-
tation of Six Sigma present a rationale for the application of Six Sigma
processes in the hospitality industry. Ante (2007b) noted several areas
and/or processes where Six Sigma may add value to the hospitality industry.
A selection of applications includes:
● Enhance customer loyalty;
● Reduce employee attrition;
● Productivity/efficiency improvement;
● Reduce billing errors/losses;
● Reduce wait time during peak check-in/out time;
● Food and beverage service and production;
● Reduce the turnaround time of making/turning down a room;
● Standardization of cleanliness across areas;
● Reduce inventory surplus; and
● An increase in the employee satisfaction rate.
 Six Sigma at Starwood 65

Although many limitations are inherent in case study research, the applica-
tion of Six Sigma within Starwood is unique in that it is the first organization
within the tourism and hospitality sector to apply this problem-solving
approach. This research, though limited to a single case, represents an
insight to the potential benefits of implementing Six Sigma practices among
hospitality and tourism businesses and organizations.

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