Executive summary of The New Gold Standard - Customer ...

Executive summary of The New Gold Standard
Dr Joseph Michelli, McGrawHill, 2008
Stimmt AG | Lukas Karrer | 4. Mai 2009
When it comes to quality, style, and unsurpassed service, the Ritz-Carlton Hotel Company
has set the gold standard for delivering the highest level of customer experience.
Companies across all industry sectors strive to meet this standard. The New Gold Standard
provides detailed insight into the five key principles underlying the company's unparalleled
success and its famous customer service innovations.
1.1 Principle #1 - Define and refine
Set the foundation
Industry leadership in Client Experience (CX) does not happen by default. To enable leaders
to distinguish between aspects of their business that cannot change versus those that must
evolve to consistently deliver a high-level and relevant experience, Ritz-Carlton (RC) defines
the pillars of enduring excellence they believe fundamental to their original success and
longevity. This distinct set of guiding concepts, called "The Gold Standard", define the
company, differentiate it from the competition and serve as a beacon for sustainable
service excellence.
The Gold Standard, Ritz-Carlton's "ultimate guest experience strategy", defines a powerful
vision and clearly communicates this vision to all staff, who can then turn this vision into
reality. To keep these standards at the top of peoples’ awareness, they have been distilled
into three easily remembered stanzas, ("credo") printed on pocket cards, that every
employee carries with them.
Ritz-Carlton Credo
• The RC is a place where genuine care and comfort of our guests is our highest
mission
• We pledge to provide the finest personal service and facilities for our guests who
will always enjoy a warm, relaxed, yet refined ambience
• The RC experience enlivens the senses, instils well being, and fulfils even the
unexpressed wishes and needs of our guests
A motto "Ladies and Gentleman serving Ladies and Gentleman" further exemplifies this
mission. The motto has served not only to elevate the status of service professionals, but it
also communicates expectations about how staff will treat one another and that RC will
protect staff from disrespectful guests.
Twelve service values establish employee guidelines for providing service the RC-way,
ensuring consistency and a targeted level for service delivery. Values encourage "ways of
being" as opposed to "ways of doing". From a customer perspective (outside-in), staff are
encouraged to focus on the desired outcome rather than applying a one-size-fits-all
approach to every guest and to every situation.

Extract of Ritz-Carltons Service Values
• I build strong relationships and create RC guests for life
• I own and immediately resolve guest problems
• I create a work environment of teamwork and lateral service so that needs of our
guests and each other are met
• I have the opportunity to learn and grow
• I am proud of my professional appearance, language, and behavior
While most businesses go through the exercise of defining values and mission statements,
very few understand the importance of regular and repetitive presentation of these core
concepts. Beyond the creation and dissemination of pocket cards, daily conversations,
conducted in so-called "line-ups", further embrace the gold standards (Repetition of values,
common language, oral tradition, positive story telling etc).
Be relevant
As important as it is to establish a framework of values to guide an organization's culture,
it is equally crucial to re-evaluate mission statements and ensure they are relevant to the
evolving needs of customers. Companies often cling to their traditional customer segments
without demonstrating the courage to evolve with changing customer trends. Managers’
antennae should be trained to register changing market conditions by studying customer
feedback, sales force intelligence, monitoring word of mouth etc.
The constant struggle faced by companies attempting to apply the define and refine
principle is knowing when something needs to be defined as an unchangeable brand
standard, and when something can be modified to reflect (local) relevance.
Key take-aways
- Distil mission statement into a set of short, memorable, and operational phrases.
- Regularly discuss the mission with staff and incorporate feedback to ensure the
mission is realized.
- If asked, could everyone in the business provide a clear understanding of the
company's mission and purpose? These are often not understood or remembered in
a functional way throughout the organization.
- What are the most basic aspects of service you wish to consistently see delivered?
- How simply have you presented the expectations of your service standards?
- Daily "line-ups" increase the consistency and frequency of messages of corporate
mission and values.
- Are you willing to take the time to regularly define the link between operational and
cultural aspects of the business?
- What are the visual symbols, oral traditions and positive stories in the business?
- You can never overcommunicate your values!
- All staff should be alerted to the importance of customer experience and of their
own performance towards delivering it.
- What aspects of your service are essential to your brand identity? Which
components can be changed to address diversity of customers?
- Do you challenge individuals throughout the company to share ideas that will keep
your business relevant and sustainable?
- No company can be all things to all people, but it is possible to be all things to your
customers.
- Delivering on customers' expressed and unexpressed wishes create clients for life.
Stimmt AG | Executive summary of The New Gold Standard 2

1.2 Principle #2 - Empower though trust
Select, don't hire
Because of RC's steadfast commitment to and passion for selection, training and
empowerment, staff at RC consistently generate extraordinary customer experiences. In
order for staff to continually and subtly act in ways that not only satisfy but delight
customers, leaders must understand the importance of identifying talent and developing
methods to select top candidates. Attracting the best by having an overly generous
compensation plan is the wrong response to the "talent war". RC has addressed this key
issue by espousing a long-standing commitment to assess the strengths of a prospective
candidate through a comprehensive process that involves multiple interviews and
identifying the right qualities and requirements for each position. Only individuals who
take pride in providing service are selected. Simply hiring somebody is nothing more than
finding somebody to fill a vacancy.
While many business leaders understand the value of a patient, methodological selection
process, they often take shortcuts and compromise their sound business platforms. In
essence, they succumb to the pressure of "we need bodies now". But you cannot microwave
a RC. By choosing the right people in the first place, turnover at RC is about 20% compared
to the industry standard of 60%.
Once the costly journey of recruitment and selection are completed, many businesses fail
to appreciate the critically important opportunity they are provided during orientation of
new employees. In many companies, orientation is seen as necessary evil, often conducted
only to fulfil legal requirements and provide an overview of the employee handbook. The
RC orientation is all about fully understanding and committing to the culture of service.
They don't rush you through that. In support of grounding new hires deeply and
immediately in mission, vision and values, new staff members cannot start employment
until they have completed the orientation process. Additionally, every employee is certified
in his first 21 days, making sure that they completely aligned with RC’s Gold Standards.
While formal training programs are in place, more informal and relationship-based
development opportunities are encouraged. A key stage of successfully developing talent
in an organisation is investing time in the mentoring process. To that end, personal growth
and development are not only built into the employee review process but they are also
required of the management team.
While it may be a somewhat unique necessity in the hotel industry, lateral service is
strongly encouraged. It is expected that everyone will pitch in to do what is necessary to
get a job done, whether or not it is linked directly to an individual job description. Guests
are not just served better through lateral service. Cross-training naturally occurs,
departments become less isolated form one another and staff members gain a great
empathy for the function of those in other areas.
90% of staff tend to make the decision to stay or leave within the first 6 months of
employment. With a firm understanding of the speed with which employees can become
disillusioned or disengaged from their work, RC has established "Day 21". On the 21st day
on the job, staff members are given a forum to freely discuss the positives and negatives
they have encountered in their first three weeks. All issues and concerns are collected to
get these addressed. Management then make sure that they get back to the person so that
they know how their issue was resolved. It is important not just to listen, but also to make
sure employees are appraised for the outcome.
Stimmt AG | Executive summary of The New Gold Standard 3

It's a matter of trust
How does RC stretch human resources and still deliver the consistent, highest-quality
experience for the guests? In one word: trust.
Staff members trust leadership to make staffing decisions that protect employee interests
over the long term. From a financial perspective, this trust is fostered, in part, by
simplifying and creating transparency around certain economic elements in the business.
By making the financial goals clear and understandable, staff in turn are entrusted to
participate in the overall success of the business.
Staff are empowered to participate in department-level discussions of how they can
individually impact the key success factors - thus building greater staff involvement in the
business by drawing a clear line-of-sight connection between each employee and the
overall success of the company.
RC developed an Employee Promise to communicate to employees what they can count on
from their employer. The Employee Promise identifies all the different processes that are in
place to serve as a commitment to staff, from career planning to empowerment
philosophy. At the core of the employee promise is a stated commitment to nurture talent
for the mutual benefit of the individual and the company.
RC systematically analyzes the trust and engagement of their employees through formal
surveys conducted by third parties.
In work environments characterized by distrust, it is common for frontline workers to say "I
will have to get my manager’s approval on this." The RC culture emphasizes service values
such as "I am empowered to create unique, memorable and personal experiences for our
guests" or "I own and immediately resolve guests problems". To further punctuate the
autonomy and trust in staff, leadership has created a vehicle that clearly permits staff to
use their own discretion in service delivery or service recovery. The approach involves
giving each employee the ability to exercise judgement in spending up to $2000 per guest
per day, if needed, either to enhance the guest experience or to afford immediate problem
resolution. The advantage of the $2000 staff empowerment guideline is that employees
don't have to delay service response by taking it up to the next level. They can take
initiative without seeking permission to enhance guest experiences.
Ultimately, by offering trust, the company will reap significant financial benefits and
increased customer loyalty.
Key take-aways
- Beyond technical skills, what processes do you have in place to study the
commitment and strengths of your prospective employees?
- How often does expediency take priority over careful selection?
- A dedication to hiring the best service professionals, no matter how long it takes,
helps RC to obtain and maintain top performers.
- How effectively do you acclimatize leaders into your organisation?
- What listening process do you have in place to re-engage new hires early in their
employment tenure?
- Leaders who focus detailed attention on the wants and needs of their staff
ultimately see that the same detailed, personalized attention is being passed on to
customers.
- Lateral service strengthens the organisation and breaks down silos. When
leadership works side by side with staff, a "we are all in this together" message is
clearly received.
- Have you defined a short list of annual key success factors for your business, to
help staff trust that you will demonstrate consistency in the initiatives you pursue?
- Do you communicate the salient drivers of success to your frontline employees and
solicit their input on how they can affect these factors?
- How does leadership take a genuine interest in the lives and ideas of all employees?
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- What can you do to help employees automatically respond to the needs of
customers without seeking higher level approval?
- Set lofty objectives for your staff members, and then, empower staff to reach them.
- When leaders listen and respond to the needs of their staff, they encourage
behaviors that fuel mutual respect companywide.
- Entrusting frontline workers with financial responsibility propels them to make
savvy decisions and establishes an environment of greatness, whereas negativity
and distrust shrink morale and service impact.
- Trusting employees to make financial decisions doesn't necessarily translate to a
significant capital investment. On the contrary, when problems are solved quickly
instead of being allowed to fester into bigger issues, it can mean savings and client
retention.
- Empowering through trust instils a sense of pride in employees, leading to service
excellence at every level of a company.
- Removing barriers that interfere with an employee's work performance can mean
the difference between an employee simply doing his job, and an employee doing
his job and enjoying it.
1.3 Principle #3 - It's not about you
Build a business focused on others
Rather than taking a top-down approach to quality, in which leaders create processes and
impose them on staff, RC has built their processes largely through inquiry. Corporate
leaders pay attention to the voice of their customers, the wisdom of world-class
businesses, the ideas and feelings of staff, and the wishes of the hotel owners. Wideranging
and rigorous listening programs help them avoid building the business from the
"inside-out".
To assess the engagement of RC staff, Gallup's Employee Engagement Metric is used:
Gallup's Employee Engagement Metric
• I know what is expected of me at work.
• I have materials and equipment to do my job right
• At work, I have the opportunity to do what I do best every day
• In the last seven days, I have received recognition or praise for doing good
work.My supervisor, or someone at work, seems to care about me as person
• At work, my opinions seem to count
• The mission/purpose of my company makes me feel my job is important.
• My co-workers are committed to doing quality work
• I have a best friend at work
• In the last six months, someone has talked to me about my progress
• This last year, I have had opportunities at work to learn and grow. strong
relationships and create RC guests for life
• I own and immediately resolve guest problems
• I create a work environment of teamwork and lateral service so that needs of our
guests and each other are met
• I have the opportunity to learn and grow
• I am proud of my professional appearance, language, and behavior
In contrast to measuring customer satisfaction (a measure of the thoughts a customer has
towards the business offering), RC measures customer engagement (a better metric of the
emotional connection and perceived fit held by a customer towards a business, and overall
customer loyalty). A solid correlation has been established between the guest engagement
score and important financial outcomes.
Stimmt AG | Executive summary of The New Gold Standard 5

Gallup's Customer Engagement Metric
• How satisfied are you with RC?
• How likely are you to continue to chose RC?
• How likely are you to recommend RC to a friend?
• RC is a name I can always trust.
• RC always delivers on what they promise.
• RC always treats me fairly.
• If a problem arises, I can always count on RC to reach a fair and satisfactory
resolution.
• I feel proud to be a RC customer.
• RC always treats me with respect.
• RC is the perfect hotel for people like me.
• I can't imagine a world without RC.
RC made the bold decision to clearly designate their hotels as either red, yellow, or green
performers. In so doing, they manage against the expectations of the customer’s needs
and not arbitrary goals. Designating a hotel as "red" was a tremendous motivation for staff
to find ways to drive guest engagement.
In addition to listening to and measuring the input of staff, guests, and desired future
customers, RC leadership creates forums to secure the input of their key referral sources in
the travel industry.
Support frontline empathy
Anticipating the customer's unstated needs is the goal of every employee, and each
fulfilment of a need should be as individual as the customer. The intimacy of interpersonal
caring and the art of anticipation are critical aspects of RC service culture. In fact, they are
the secret ingredient of the RC mystique.
In order to create a memorable experience, a service provider has to connect with a guest's
individuality and deliver service customized to that guest's preferences. To produce
memorable experiences, leadership must help staff to both inquire and execute on the
details of historical information gathered about the customer. One of the greatest risks
however, to asking guests their preferences is that it sets up an expectation that those
preferences will be acted upon. That is why RC likes to pick up as much as they can about a
guest from direct observation and not to draw too much attention to those moments when
specifically seeking out preferences. One of the keys to great service is to find a way not to
be intrusive, but rather to be observant.
Research shows that if you handle a problem quickly and adequately, you might get a more
loyal guest than if there were no problems at all. It all comes down to taking the focus off
your needs and stepping into the shoes of the guest. If you see a problem, you own it. Your
title is irrelevant.
Key take-aways
- What outside business experts do you invite into your company to evaluate the gaps
in the quality of your services?
- Whose processes do you study (peers, industry leader etc.)?
- Do you measure the emotional engagement of your employees?
- How are you measuring your company's ability to foster an ownership position
among your employees? Are you assessing the degree to which employees have the
materials and resources they need to do the job?
- What efforts do you make to not only measure the satisfaction of your customers,
but also their emotional engagement with your brand?
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- Do all employees at all levels of your organisation understand your customer
feedback metrics? Do they understand the importance of those metrics to the
overall success of the business?
- How do you attempt to listen to the needs and opinions of those who choose other
providers?
- Would your company be described as a customer-centric business or a more inwardlooking
business focused on process efficiencies?
- Great leaders take the time to ask; they repeatedly inquire, listen, and then act.
- An engaged workforce personally invests in success and business growth, while
creating an engaged clientele.
- Encourage your employees to be involved in the planning of the work and processes
that affect them.
- Have you helped staff understand the distinction betweens anticipating and
fulfilling customer needs?
- What processes do you have in place to track customer preferences? Is that data
used to personalize customer service?
- How safe is it for staff to share operational problems and mistakes, without the fear
of reprisal?
- What processes do you have in place to track breakdowns and defects?
- How effectively does leadership collect, compile, and communicate quality
performance data?
- How do you balance your company's need to track customers preferences with the
customer's need for privacy?
- Customer engagement is measurable.
- Extraordinary service providers connect with each customer's individuality and
deliver service that is customized to every person's preferences.
- Personalizing service means paying attention to subtlety and nuance in client
behaviours and committing to deliver on these client inclinations.
- Asking questions and showing concern for your customers is valuable only if you
act on those needs.
- Collect and track client-interaction data to constantly build on successes and repair
breakdowns.
1.4 Principle #4. Deliver wow!
Research has shown that customers who are merely "satisfied" with a company's service are
far less likely to remain loyal to that business than customers who are "extremely
satisfied". Specifically, customers who reported they were "extremely satisfied" with a
business were 2.5 times more likely than only "satisfied" customers to make future
purchases. Extremely satisfied customers emerge through memorable and emotional
connections forged between them and a business.
Apparently, we've moved beyond the era of "delighting" customers and are now in an era
where much more is expected. RC leadership calls this desired memorable and emotional
connection a "Wow experience". The importance of delivering a Wow moment at a guest’s
first point of contact is, therefore, a primary goal.
Many examples are given:
• Couple, wife pregnant, celebrating their first anniversary in RC -> Bottle of sparkling
cider instead of champagne in Hotel room; special body pillow in room.
• Sick guest "disturbed" by room cleaning -> Concierge calls later to check how she is
feeling and if she needs a doctor.
• Business-Guest reserved 4 weeks stay -> RC printed business cards with in-room
telephone, fax number to hand out.
• Guest goes jogging -> staff receives him with a warm towel and bottle of water
Stimmt AG | Executive summary of The New Gold Standard 7

Some of the greatest opportunities for wowing customers occur when breakdowns happen.
The steps involved in salvaging a bad experience (whether caused by your business or not)
are fairly simple, yet all too often these steps are not followed:
1. share a genuine and compassionate reaction to the person's distress
2. offer appropriate apologies
3. assure the client that you will take care of the issue
4. see that the problem is taken care of in a way that meets the satisfaction of the
client and does not recur
5. go one step further to demonstrate that you want to try to compensate for the
person's loss or frustration
Bad news lingers. In a world where customer opinions remain on the Internet and where
people are more likely to share negative experiences than positive ones, the lasting impact
of delayed service recovery can negatively affect prospective customers.
With the ease of worldwide communication, companies can't just practice service recovery
but must instead execute immediate service recovery. The sooner customers are satisfied,
the less likely they are to share a negative review that may have damaging consequences.
Turn wow into action
Wow stories are one of the most important vehicles that the leadership at RC uses for
communicating the values they see as critical for the success of the company. If an
employee's action results in a wow story, this is published internally and the employee gets
rewarded with $100. While this financial acknowledgement is valued, it's more about the
recognition and just having done a great job. Staff take pride in what they do. It's about the
joy in being able to serve. In addition, keeping track of wow stories helps RC provide
examples of customer service excellence that match important corporate themes and
business targets for the year. RC also sets objectives on how many stories each hotel will
submit each year, holding leadership responsible for constantly identifying people that are
doing things well.
Wow stories are but one tool for communicating with staff. Ultimately, this tool has to be
understood in the context of the objectives it achieves. Namely, helping leadership identify
and communicate desired guest outcomes. In order for wow stories to be maximally
successful, they can't stand alone. They must be supported by open communication from
leadership to staff and staff to leadership. They must be part of a constant dialogue about
service, quality, values and excellence.  
Key take-aways
- In what ways have you designed service delivery that appeals to both thinking and
feeling aspects of the consumer?
- How do staff gain an awareness of the opportunities they have to wow or make
emotional connections with customers at every touch point of the cutomer
interaction?
- Can staff distinguish between the purpose and function of their job
- How readily do you and your staff wow customers through immediate service
recovery?
- While it is easy to deliver, a warm welcome is rare enough to stand out in the minds
of customers.
- The more quickly a problem is resolved, the more quickly it is forgotten.
- Whether or not a business is responsible for issues and mistakes, a customer is
most likely to remember who took the initiative to fix them.
- What methods do you have in place to capture positive stories of service excellence
or other highly valued employee behaviors?
- What forum do you have in place to which routinely share these stories?
- Do you tell stories that reinforce core cultural values and paint a compelling picture
of your goals?
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- Have you created an environment in which all employees can exchange positive
service stories?
- How do you capture and share stories of collaboration and great teamwork?
- Wow moments happen in every workplace. Collect and share those stories with all
employees to generate an environment of top performance.
- Annual awards presentations are valuable, but regular, frequent recognition is
necessary to sustain a culture of excellence.
- Reward excellence by publicly acknowledging the person who acted above and
beyond the call of duty so as to motivate others to emulate those behaviors.
- Look for ways to identify employees that do something well.
- Help your employees to understand how much interpersonal power they have,
individually and collectively, to positively affect the lives of their customers and the
overall success of the business.
- Providing excellent service is a reward unto itself.
1.5 Principle #5 - Leaving a lasting footprint
In the competitive world of business today, leaders are looking for opportunities to
maintain the relevance and sustainability of their established brands. Based on customers'
perceptions and knowledge of your brand, there are certain types of products that
customers would expect you to sell. For many, RC was such an important part of their lives
that they eagerly wanted to reconnect with the company whenever possible.
Examples of RC Brand Extensions
• RC-club - exclusive, luxury-tier, deeded fractional ownership real estate
• RC-spa and golf-club
• RC-residences, privately owned properties overseen and managed by RC staff
While brand consultants talk about the "elasticity" of a brand (how far can a company
stretch its diversity of offerings before customers reject the products), leadership at RC is
more focused on how brand extensions can strengthen one another. In essence, they view
each offering as an opportunity to strengthen the connections between their products.
Key take-aways
- When considering new products or expansion opportunities for your brand, have
you explored the perceptions of your customer base?
- What service offerings would stretch the elasticity of your brand?
- How can you best position your products or services to strengthen your overall
brand, while driving your customers from one business offering to the next?
- Truly engaged clients are especially keen to experience expanded product and
service lines from the businesses they trust and respect.
- Great brand extensions emerge from the core competencies of a company.
- Businesses too focused on the bottom line will create a legacy only for their
investors.
- Have you clearly defined a systematic approach to corporate social responsibility
with specified themes for giving?
- How far is your company willing to go in support of corporate volunteerism and
social involvement?
- What return values does your staff receive from their social responsibility efforts?
- Community engagement efforts by businesses might not provide measurable
dividends to investors, but great leaders consider this engagement as a long-term
benefit for their people and an essential ingredient to creating sustainable
relationships in areas where they do business.
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