Ritz-Carlton Founder Horst Schulze On Creating A Gold Standard

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Ritz-Carlton Company co-founder Horst Schulze on how Ritz-Carlton became known as the gold standard for customer service, challenges the company faced as the gold standards were being established and more.

How did you come up with that process for creating the Ritz-Carlton gold standards? Obviously, you guys did quite a good job because I think even to this day Ritz-Carlton is well known and famous for its standard of customer service. So obviously that stuck. What was the making of that?

I understood what it means being a busboy and dishwasher, a waiter, a cook. I understood that. I’ve looked at it from their side, made a few beds.  So I said, “Okay I want to create an environment where the employees are really part of the organization.” And years ago when I was in doing my first job, I was 16 years old, I wrote an essay for…mind you, once a week we went to hotel school at the time…I wrote an essay and I named it, “We are ladies and gentlemen,” meaning the employees in the hotel, “And we serve ladies and gentlemen.”

That’s what I wrote as an essay and explained in there, “We are ladies and gentlemen. If we are doing an excellent job, a first-class job, we are respected by the employee and we define ourselves by being excellent as ladies and gentlemen.” And with that motto, I started Ritz-Carlton and I said right from the beginning, you’re not servants. Day one I said, “We are not servants. We are ladies and gentlemen serving ladies and gentlemen. Unless we sentence ourselves to be less, to be servants. That’s in our hands.”

If we are excellent and caring and respectful and so on, then we are ladies and gentlemen. That was the motto. And then, of course, we did the training around it and our process was to hire the right people. Not just hire people but select people and then orient them, not just put them to work but orient them to our thinking. Inviting them to be part of us. Coming here, become part of “being ladies and gentlemen.” Helping create the finest hotel company in the world.

Day one I said, “I want to create the finest hotel company in the world.” And when I hired people I said, “Join me, don’t come to work here. Join me to create the finest hotel company in the world.” In the beginning, people laughed and said, “We don’t even have a hotel.” I said, “Yes but we’re creating the finest. Join me.” So it was a selection, an orientation, training and identifying here are the 20 things that will make us better than the competition. And teaching those 20 things every day, repeating one of those things everyday.

You couldn’t go to work unless you had the message of the day. Today, it may be point 11, which I shared in every hotel before every shift. In 20 days, it’s repeated again when it’s important. So it’s a process of teaching and repeating and sustaining, hiring the right employees, selecting them, orienting them, making them part of the company. Give them purpose and not just a job to work. So that’s what the whole philosophy of the organization that is my philosophy. And make it very clear every employee is a lady and gentleman, unless you are lousy doing a job then you’re obviously a bum. (laughs) I’m sorry.

What were the challenges you guys faced along the way?

It was more difficult to install it in the experienced managers than in the employees that we hired. The employees embraced it immediately. The managers looked at it cynically in the beginning. “What do you mean the best hotel? We don’t have a hotel. What do you mean? What do you mean they are ladies and gentlemen? I’m a…” No, no, no, understand and everybody else was explained, they are ladies and gentlemen exactly like you are.

And some managers didn’t accept that or the culture.  We had a little bit of culture difficulty when we opened our first hotel in Hong Kong…I was explaining that to the room service department that they are “all ladies and gentlemen.” I looked at the manager, “Understand that they are ladies and gentlemen. You are the manager. You help them to be successful and they can give opinions. They’re expected to give opinions.”

That manager came to me afterwards and said, “I didn’t come here to hear the opinions of the employees. I’m the manager,” and he quit. There was cynicism in the beginning until everybody saw the success of what we had. Yes, it is right to respect every employee. They deserve to be respected unless they show that they don’t deserve it. And then we have to change them.

And you know, it turned out after while our employee turnover was unbelievably low in comparison to the industry. People didn’t leave. We didn’t pay more. Understand, we took over a few hotels with unions, but we never became union. In fact, in San Francisco the union picked us for three years and we didn’t become union in San Francisco. We didn’t pay more but we respected employees. We selected people. We respected them. We made them part of the thinking of the organization and so on.

Employees are empowered. I don’t know if you’ve heard, employees can make a decision up to $2,000 in order to keep a customer. If a customer complains, they can decide up to $2,000 so we don’t lose that customer. Every employee knows their role was to keep the customer. Never lose a guest. That was the biggest shock that everybody ever heard when I said every employee is empowered to make a decision up to $2,000. Nobody did that. People may have bought breakfast for a guest who said, “I couldn’t sleep well because there was noise in the street.” We certified each employee for proper resolution. So when they complained and came to them, they didn’t say, “Call the manager.” They said, “Please forgive me, I’ll take care of it.”

 Check back for part two of our conversation with Horst Schulze


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