Balancing Tradition and Innovation: Ritz-Carlton's Opening Dilemma

The Ritz-Carlton Hotel (RCH) faces a dilemma, change its seven-day countdown process and succumb to the pressures of Millennium Partners (MP) or maintain the company’s proven strategy and open at a manageable occupancy level. By examining how RCH’s culture, leadership, and service contribute to the essence of the Ritz-Carlton we will show how RCH effectively opens new hotels and continues to operate at a high level. Essence – RCH is a service company that prides itself on high levels of customer satisfaction.

By putting customer satisfaction first, we maintain the Ritz-Carlton Mystique. Culture – RCH sells an organizational culture dedicated to treating and developing employees as business ladies and gentlemen, enabling each individual to treat their customers in the same regard. Service – By ensuring that all employees are aligned with the RCH mission and providing them with the tools to do their job, RCH creates an environment where continuing levels of high quality service can be maintained.

Leadership – “Ritz-Carlton leaders are responsible for stewarding an icon in the luxury market.

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” By assuming a transformational role during hotel opening and transitioning into a transactional role to maintain employee performance and motivation, RCH is able to continue as the gold standard of service industry. Our recommendation is to utilize the proven seven-day process during the Washington D. C. opening. What was once a 14-day countdown became a 10-day countdown and is now a well-packaged one-week orientation that produces the most effective experience for new RCH employees.

Lengthening this process will only waste money and time, and will also diminish the powerful emotional significance that transforms normal people into RCH ladies and gentlemen.

In order to conciliate MP, we suggest that RCH maintain the current orientation system but increase capacity at a higher rate within the first two months of opening (versus all at once); a compromise that satisfies both parties.

The Ritz-Carlton Hotel (RCH) faces a terrible dilemma: change its hallmark, seven-day countdown process, and succumb to the pressures of Millennium Partners (MP) — or maintain the company’s proven strategy and open at a manageable occupancy level. We will analyze the processes that create the Ritz-Carlton mystique and ensure hotel management has a sound strategy to balance exceptional service with exceptional profit. Findings and Analysis Essence – Horst Schulze’s words, “our business is service” resonates throughout every aspect of RCH’s structure.

Defining itself as more than a hotel company, RCH is a service company that prides itself on high levels of customer satisfaction. This forms the foundation of RCH’s hiring and training practices, operational methods, and strategic planning approach. To promote this concept, RCH regards employees as “ladies and gentlemen serving ladies and gentlemen”. 9 The essence is exemplified through the company credo, “The Ritz-Carlton Hotel is a place where the genuine comfort and care of our guests is our highest mission”. 1 “Genuine comfort and care” is created by ensuring that employees are trained and motivated to be up to the task.

Ultimately, individualized services such as custom pillows or the bartender keeping track of your favourite drink are the essence of the Ritz-Carlton experience. Culture – “Ladies and Gentlemen Serving Ladies & Gentlemen” is at the heart of RCH’s history and culture. RCH suggests that employees "join us, and not just work for us", creating a climate of inclusion and job enrichment. 2 The hiring process treats all potential employees as if they were customers, beginning with a “warm welcome” and ending with a “fond farewell”.

RCH sells an organizational culture dedicated to treating and developing employees as business ladies and gentlemen, enabling each individual to treat their customers with the same regard. Customer satisfaction depends on Ritz’s human resource focused organization, a culture that instills a sense of pride in each employee. 8 Management recognizes the importance of customer satisfaction, continuously improves training and implements quality control measures so that customers have a once-in-a-lifetime service experience during each stay.

The Ritz-Carlton doesn’t create ladies and gentlemen in just seven days; rather RCH hires employees who embrace the core values and possess characteristics aligned with their culture. The seven-day countdown aligns the mission of the worker and the organization, creating goal acceptance and commitment. 9 The first two days of orientation introduce employees to the organization’s espoused values while the remaining five days ensure they are able to effectively enact those values before the opening.

By treating employees ith dignity and respect, RCH has proven that their employees can deliver the service of ladies and gentlemen by the end of the seven-day countdown. 9 Service – Meeting the needs of employees allows them to focus on the needs of the guests. RCH provides employees with a purpose and not just a job; respect and motivation ensure employees continue to provide excellent service and exceed the expectations of guests. Fulfilling employee needs results in a turnover rate of 20% (80% less than the hotel industry average) 9.

Once the employee’s physiological and security needs are satisfied through compensation and rewards, job enlargement, and performance measurement (Appendix – fig. 1), the environment and training regimen instill their importance. Suggesting employees are as valuable as the hotel guest fulfils their belongingness need. Continued success stories such as Alex Garza's rise from line cook to executive sous chef resonates opportunity; this possibility of career advancement meets esteem needs and provides motivation to strive for something higher.

Self-actualization occurs when the employee’s other needs are satisfied and are continually challenged with their current job. A good employee plus a good environment equals a good job. Not all ham sandwiches make it into Ritz’s lunchbox. Ensuring the individual is a fit for the Ritz culture, the rigorous and comprehensive pre-employment process selects individuals more inclined to perform. 9 Utilizing a communal approach, unfavourable outcomes are viewed as a by-product of an inadequate work environment, not the capable employee.

The seven-day countdown serves as a motivational boot camp, stressing expectations by reflecting company history, philosophy, and values. Immediately providing SMART goals10 through the Gold Standards, employees know what is expected of them. RCH understands the importance of “nourishing the soldier on a daily basis” by providing motivational reinforcement through daily departmental line-ups and the tri-fold card worn in the breast pocket. Daily communication using Service Quality Indicators provides employees and leadership with feedback necessary to maintain and improve the level of service.

Leadership – “Ritz-Carlton leaders are responsible for stewarding an icon in the luxury market. ” 6 During hotel openings, senior leaders play a participative role and establish their presence as transformational leaders, introducing the Ritz Carlton vision and culture to an unsuspecting cast of new employees. From the beginning, leaders utilize the Pyramid Concept (Appendix – fig. 3) and immediately set the tone for business excellence and employee expectations.

During the seven-day orientation new hires are further exposed to the culture and given skills that transform them into effective and capable employees. The culture is reinforced through emotionally significant stories of corporate history and “Wow” stories of employees who went above and beyond their assigned duties to please a customer. Following the opening phase, leaders transition into a transactional role and use a Total Quality Management (TQM) approach to create a synergistic environment where organizational functions align with customer needs.

Individual worker empowerment, opportunity for advancement (cross-training opportunities) and positive reinforcement in the form of rewards, creates a committed workforce that feels they have a “common stake” in the outcomes. RCH also uses a Team Management style (9,9 on the Leadership Grid) to balance concerns for production and people and maintain a motivated workforce with turnover well below the industry average. 2 By criticizing in private and praising in public, leadership promotes a culture of forgiveness where problems are solved instead of avoided.

Public praise allows leadership to take advantage of social learning to ensure proper employee motivation. 2, 7 According to the job-characteristics theory, the daily line-up provides employees with feedback, makes them responsible for outcomes, reminds them of the meaningfulness of their work and motivates them to provide world-renowned service to customers. Recommendations Based on our analysis, we recommend that you do not fundamentally change the hotel opening procedure.

We feel that “resistance to change can be used for the benefit of the organization” by preserving values that currently bring success. 2 Changing the opening process is an obvious concern for both RCH and MP; however, MP's proposal will harm RCH’s ability to operate and provide world-class service. Our innovative solution alleviates pressure from MP to change RCH’s most recognizable standard of service in the hotel industry while appealing to MP’s profit-driven nature.

RCH focuses on maximum quality through efficient processes; its orientation system is a best practice competitors strive to emulate. 6 Flawless execution is the goal and MP’s myopic idea to focus on short-term profitability, lengthen the countdown process, and open at full capacity, is not an efficient business strategy for several reasons. 9 Wow Factor – Within seven days, RCH focuses its orientation on acculturating new selectees into the company’s philosophy and quickly makes them a productive part of the team.

This can increase retention by 25% and results in thousands of dollars in bottom line savings. 3 In an interview J4MD had with Janet Crutchfield, RCH’s Director of Quality, she mentioned what was once a 14-day countdown became a 10-day countdown and is now a well packaged, one week orientation that produces the most pleasurable experience for new RCH employees. Lengthening this process will not only incur more costs and waste time, but will also diminish the powerful emotional significance that transforms normal people into RCH ladies and gentlemen.

Ultimately, there is no guarantee that lengthening this process will improve operability on day one. The RCH brand cannot afford to change its proven methodology and risk damaging its mystique and exceptional level of service in an effort to increase immediate reward. Affecting the Customer Base – RCH provides the customer with intangibles they cannot buy – respect, dignity, and unfeigned service. These values must be ready for every guest on day one. If you open at full capacity (300 rooms), a level that RCH ladies and gentlemen may not be able to handle immediately, you create unnecessary risk.

You only get one opportunity to make a first impression; maintaining the standardized opening practices will ensure the opening of the D. C. hotel is as flawless past openings. Also, the philosophy to “never lose a customer” is paramount and results in a lifetime of loyalty and revenue. Estimates show that the engaged RCH guest spends over $1 million in the lifetime of the company; additionally, some guests will purchase multimillion-dollar properties from RCH. 5 RCH cannot risk losing these customers by failing to satisfactorily rectify a problem during a one night stay.

Innovating with Class – In the competitive hotel business, maintaining relevance and sustaining the identity of the RCH brand is equally important as financial profit. When narrowly focusing on the bottom line, it leaves a legacy only for the short-term investor. 6 In order to conciliate MP, we suggest that RCH maintain the current orientation system but increase capacity at a higher rate within the first two months of opening (versus all at once). This compromise satisfies both parties.

Currently, enough employees are hired to meet the demand of an 80% occupancy level. Our proposed plan is to continue to open at the unchanged 50% initial capacity rate, but quickly increase in 25% increments every four weeks, shortening the time horizon of realized profits. Effectively, RCH will initially open with 150 rooms and after four weeks (and the employee 21-day review) another 75 rooms will open (75% occupancy). The final 75 rooms will open at the end of the second month with a qualified staff that is fully prepared to undertake an operation at full capacity.

MP will agree that realizing profits in two months is better than four. RCH has what it takes to accomplish this as this is proven by all the accolades received over the years. Utilizing the TQM philosophy and 4-step innovation process (Appendix – fig. 2), senior leadership and the front-line employee can set appropriate benchmarks immediately after opening. This will elevate the ladies and gentlemen of RCH to new heights and leave a lasting legacy in the Washington D. C community.