Ritz-Carlton Founder Horst Schulze On Creating A Gold Standard

If there were ever an unlikely person to make waves in the hotel industry, it would have been Horst Schulze. The man who co-founded the Ritz-Carlton company had as unlikely of a journey as you’ll find considering his upbringing.

“I grew up in a small village in Germany. There were no hotels. I’d never been in a hotel and I don’t know how it got in my mind. When I was 11 years old, I went to my parents and said, ‘I want to work in the hotel business.’ And they [were skeptical], but I kept on saying it. I was persistent.”

His parents reached out through the government and found him a job as a busboy dishwasher in a hotel 60 miles away from his home village. And that’s where it begin—a career that ultimately led him to becoming the co-founder and founding president of the Ritz-Carlton company, creating a standard in customer service that has transcended the hotel industry.

Chief Executive got a chance to speak with Schulze, who is promoting his newest book, “Excellence Wins: A No-Nonsense Guide To Becoming The Best In A World Of Compromise” in a wide-ranging interview to talk about how Ritz-Carlton became known as the gold standard for customer service, challenges the company faced as those standards were being established and much more. Below is part one of a two-part interview.

Talk about coming up in the hospitality industry and how you got to a point where you co-founded the Ritz-Carlton company.

I left home when I was 14 and started as a busboy in the hotel business. I worked in Germany, worked in Switzerland. I honestly worked in the finest hotels in Europe. I’ve worked [for] Holland America Line. I worked in Paris in Plaza Athenee for three years. I worked in London in the Berkeley and in the Savoy. And then came to the U.S. in ’64 with the intent to be here for a year or two. I worked for Hilton and Hyatt and then was offered a job to start a new hotel company in charge of operations…that ended up becoming the Ritz-Carlton.

Was the idea to start a hotel that was high end and really focused on customer service something that just kind of came naturally?

No, I worked in Hyatt at the time and I had a great job. I was the corporate vice president. I had started in Hyatt as a food and beverage manager, then became a rooms manager, a general manager, a regional vice president over 10 hotels and then was made corporate vice president. I didn’t need a job. I had golden handcuffs and everything, but [the Ritz-Carlton people] called me and said, “Hey we are starting a new hotel company. We need somebody to run the operations.” I said, “If you are willing to go top market I would be interested, but I’m only interested top market.”

So I moved then from Chicago to Atlanta to start this new company. At that time, the leaders in the industry were Hyatt, Westin, InterContinental and so on. And I didn’t want to compete with them, I wanted to go above them. That was the simple idea and above it means particularly related to service delivery and so on. Again, I had worked in the greatest hotels in Europe and I wanted to combine the relaxed relationship of America with a little more refinement from Europe. That was the idea and that’s what we did. So I came here and of course a little bit over a year later, we opened our first hotel in Atlanta and the rest is history.

But with all this, in every location saying, I want in every location to be the absolute leader. I want to be known in every location as the absolute leader and that is accomplished with great service and with great product. That’s the only way to accomplish that. And we created the right processes, the right training and so on and hired the right people. Now mind you, I didn’t do it by myself. There were a lot of people.

I was at the Forbes Five Star Awards two years ago. I went there and there were all the great hoteliers from around the world. And they said that Horst Schulze is in the room and everybody stood up and applauded. But let’s be honest they didn’t applaud me. They applauded the image that Ritz-Carlton had built up, which was achieved by bellmen, doormen, busboy, cooks, waiters, maids and so on. They created that image. We created a great image that was good for everybody and good for the employees, because if a Ritz-Carlton employee looks for a job and there are a hundred others, the Ritz-Carlton employee gets it. Why? Because of the image. I was able to have a [positive] image because of many people doing a great job.

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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