Hotel giant resorts to Six Sigma to improve operations

By Tan Kay Chuan, National University of Singapore and Ayon Chakrabarty, Queensland

University of Technology

Six Sigma provides a framework for quality improvement and business excellence. Introduced in the 1980s, the concept of Six Sigma has gained popularity in manufacturing and service organizations. After initial success in healthcare and banking, Six Sigma has gradually gained traction in other types of service industries, including hotels and lodging.

Starwood Hotels and Resorts, one of the largest hotel chains in terms of revenue, was the

first hospitality giant to embrace Six Sigma. In 2001, Starwood adopted the method to develop innovative, customer-focused solutions and to transfer these solutions throughout the global organization.

“Six Sigma gives us the tools to eliminate variation and improve efficiency,” said Denise

Coll, regional vice president of Starwood’s New England operations. “It has strong record in

manufacturing productivity, perhaps most visibly at General Electric (GE). It’s also extremely

adaptable; since its introduction at Starwood, we’ve refined it dramatically to reflect our focus on service quality and satisfying the voice of the customer.”

It stands to reason that studying Starwood and its Six Sigma activities would provide an

opportunity to critically analyze Six Sigma implementation in a different type of service

organization and learn from its experiences.

Measuring success

Before you can discuss Six Sigma and how it’s being used in service sectors, you must

understand critical success factors (CSFs), critical-to-quality (CTQ) characteristics, sets of tools and techniques (STTs) and key performance indicators (KPIs).

CSFs are described as essential ingredients required for successful Six Sigma projects.

CTQs are those quality dimensions that a Six Sigma project aims to improve. They are the

product or service characteristics required to satisfy customer needs.

KPIs are not well defined in literature, and there are many interpretations. Mostly, KPIs

are likened to performance metrics—that is, measures of performance in terms of cost, quality, yield and capacity.

The STTs used in Six Sigma are nothing new. The Six Sigma method simply provides a

framework for their systematic application. Tools have specific roles with a narrow scope,

while techniques have wider application and require specific skills, creativity and training.

The Six Sigma literature we researched focused mainly on CSFs.

Collecting and analyzing the data

To analyze Starwood’s use of Six Sigma, we collected data from articles, interviews,

presentations and speeches published in magazines, newspapers and websites. This provided

details to corroborate information, and we also made inferences from these sources.

The data from the documents were analyzed to uncover evidence about CSFs, CTQs,

STTs and KPIs. An initial analysis did not provide much information about STTs and KPIs.

Further analysis did reveal more information about CSFs and some on CTQs.

In the case of CSFs, there was only mention of top management commitment to

Six Sigma and its initial push for this approach. Barry Sternlicht, Starwood’s former chief

executive officer, is credited with introducing Six Sigma at Starwood. For example,

Sternlicht appointed a former GE executive to become the executive vice president of Six

Sigma at Starwood, giving global responsibility to this individual for executing strategy,

designing tools and overseeing implementation of Starwood’s Six Sigma initiative.

Other articles revealed where Six Sigma projects were able to add value at Starwood.

Creativity and innovation

Though the analysis did not provide information on STTs and KPIs, the research offers insight into how Six Sigma relates to creativity and innovation. Traditionally, Six Sigma has been seen as a prescription for conformance rather than a formula for creativity, breakthrough thinking or entrepreneurship.

Six Sigma at Starwood, however, proved to be a source of innovation, as shown by the

development of profitable guest programs. For example, Starwood team members used Six

Sigma to formulate one program called “Unwind,” which offers complimentary massages for

guests and draws them to the lobby to meet and mingle. This initiative actually helped and also surprised Starwood as the revenues from paid massages in the hotel spa hit an all-time high, rising 30% over the previous year.

Another program, Star Meeting Concierge, grew from another Six Sigma project. The

hotels now provide a meeting concierge assigned to a Meeting Organizer as a permanent point of contact, on hand to welcome delegates, explain how the technology works, anticipate needs and respond quickly to any requests for assistance, ensuring the best service. Outside meeting planners are given business cards with the photo of their concierge so they can recognize them in an area where several meeting groups may be gathered. The free service enhances the customer service the concierge was able to provide to the meeting planners. As a result of the program, 95% of meeting planners rated their concierge’s responsiveness as excellent.

During research on Starwood, limited information about its Six Sigma successes was

found through popular databases such as ISI Web of Science, ABI/Inform and Business Source Premier.

Also worth noting was the fact that scholarly journals did not include any related articles on

Starwood and its Six Sigma efforts, suggesting a lack of academic perspective and visibility on

Six Sigma case studies in service organizations.

Bottom-line results

Financial metrics can help you understand the success of Six Sigma in any organization.There was no shortage of examples of Starwood’s success resulting from Six Sigma project metrics uncovered during our research. For example:

At the Westin Turnberry Resort, a Six Sigma project resulted in an 11.95% increase in incremental spending by customers and an increase in room revenue of more than 19%.

A Six Sigma project improved reservation systems and helped maximize the use of

massage therapists and treatment rooms, increasing spa-related revenues from $145

per booking to $225 per booking.

Another Six Sigma project focused on improving the housekeeping service process.

That project resulted in:

An estimated yearly reduction of $500,000 in cost of poor quality

Reducing the time it takes to clean rooms by 65%, to eight minutes.

Reducing the number of defects per room from 42% to 3.7%. This resulted in

cleaner rooms.

Increasing the number of rooms that a member of the housekeeping staff can

clean each day—from 13 rooms to 17 rooms. This resulted in labor cost savings.

Reducing a housekeeper’s movement within a guest room by 64%, or 205 feet.

Another pilot project at the Westin, Atlanta North hotel focused on streamlining the

laundry separating process. As a result of the project, the laundry department improved

productivity by 14%, representing a savings of 291 hours of non-value added time each year.

The same project at another resort resulted in a savings of 815 hours of non-value added time each year, or $11,415.

When Six Sigma was initiated at Starwood, the company incurred $17 million in training

costs. At the same time, the company reaped tangible earnings before interest, taxes, depreciation and amortization—increases of more $17 million.20 Since then, programs developed under Six Sigma have delivered more than $100 million in profits to Starwood’s bottom line.

Further study needed

Our findings have many implications for researchers and practitioners. The findings help identify the particular CSFs and CTQs that acted as a guide for practitioners in Six Sigma

implementation. The findings also showed that Six Sigma can spark innovation and promote a culture of creativity in Six Sigma projects.

For large-scale systems that share customers across business units, Six Sigma can have a

big impact when it comes to innovation.22 One of the important aspects of Six Sigma is linking projects to dollar savings. This enables top management to assess the actual effectiveness of each project and the overall success of Six Sigma program.

Starwood has not only achieved and exceeded customer expectations, but it has also

registered high bottom-line results. This should be an important indicator for top management of other service organizations, as well as practitioners while implementing Six Sigma.

Limited scholarly articles on Six Sigma implementation in service organizations are a

cause for concern, especially when a high-profile service organization such as Starwood is

reaping such great benefits. Scholarly studies on Starwood’s success could encourage Six Sigma implementation at manufacturing and service organizations, just as GE’s story did in 1990s.

AUTHORS’ NOTE

The research for this article was done strictly by reviewing documents in public domain about Starwood’s Six Sigma implementation. The number of documents was limited. The authors acknowledge that interviews with key personnel involved in Six Sigma implementation at Starwood were not possible. Future studies should involve interviewing participants of different levels of Six Sigma activities at Starwood.