Six Sigma Kick-Starts Starwood
In January, 2006, the Westin Chicago River North hotel was picked to pilot a project, dubbed Unwind, for the upscale hotel chain. The purpose: to imagine a set of nightly activities that would draw guests out of their rooms and into the lobby where they could meet, mingle, and develop a greater loyalty to the hotel group. Westin spied an opportunity with Unwind after a study it produced found 34% of frequent travelers feel lonely away from home.
Instead of hiring consultants or ethnographers, a common first step for a new initiative, the hotel chain relied on a seemingly stodgy process: Six Sigma. Originally developed by Motorola (MOT) in the 1980s as a quality-control mechanism, the program has become part of the fabric of Corporate America. With its focus on reducing defects and cutting business costs, the technique has spread from manufacturing to the services sector.
Even 3M (MMM) has embraced it—with mixed results. The program hurt the inventive Minnesota company's creativity, which is precisely the rap it has among companies trying to innovate. So when Starwood Hotels & Resorts Worldwide (HOT), Westin's parent company, introduced Six Sigma in 2001, "there was tremendous skepticism," admits Geoff Ballotti, president of Starwood's North America Div.
Under Ballotti, however, Starwood has found Six Sigma's strengths can promote innovation, not stifle it. Combining creativity and efficiency, instead of pitting one against the other, is a delicate managerial maneuver that few service companies have been able to pull off. Starwood is one. Bank of America (BAC) is another.
Starwood has been successful, in part, because it began with a culture of creativity before introducing the management tool. Founder Barry Sternlicht relied heavily on design to distinguish the hospitality company's Sheraton and Westin hotel brands from the competition. He brought in noted architect David Rockwell to help create Starwood's hip W Hotels brand.
Quick Execution of Concepts
Today, by harnessing Six Sigma processes to the creativity that bubbles up from its hotel units, Starwood is able to quickly turn concepts into reality. Hundreds of projects have been done this way, including a "menu engineering" program that rejiggers the contents of an in-room refrigerator based on their popularity to drive higher profits, and the development several years ago of a pool concierge who helps guests in Latin American resorts book spa appointments and restaurant reservations. "Everybody admires them for how they do this," says Jeneanne Rae, president of Peer Insight, an innovation consulting firm based in Alexandria, Va.
Last year, according to Starwood management, programs developed under the famed management technique delivered more than $100 million in profit to its bottom line. As a result, the White Plains (N.Y.) company is one of the world's most profitable hotel operators: Its net margin is nearly 15%, higher than those of rivals Hilton Hotels (HLT) and Marriott International (MAR), as well as the industry average of 9%. "We have been driving our margin growth faster than our competitors," says Ballotti. "When people ask why, I point to Six Sigma."
The company's Six Sigma group is run by Brian Mayer, who claims the quirky title of vice-president of Six Sigma, Operation Innovation & Room Support. "I grew up in the hospitality industry," says Mayer, whose grandfather and father ran catering businesses. "The joke is that I was born in a chafing dish."
Partnering with Staff
Since the program launched in 2001, Mayer's crew has trained 150 employees as "black belts" and more than 2,700 as "green belts" in the arts of Six Sigma. Based mostly at the hotels, the specialists are change agents who help dream up and oversee the development of projects. The key to their success is that instead of acting like muckety-mucks imposing their will from "corporate," the Six Sigma specialists operate more like partners who help the hotels to meet their own objectives, Mayer says. Indeed, almost 100% of the creative concepts come from in-house hotel staff. The Unwind program, for instance, was generated by the Westin group. And every project must be overseen by a hotel employee. "By focusing on their goals and budgets it enables us to become a partner in the operation," says Mayer.
The process begins when hotel teams pitch Mayer's group on a new idea. "It's competitive," says Mayer. "They fight for our resources." A Six Sigma council composed of Ballotti and his 13 direct reports, including his senior vice-president for operations and sales and marketing, then evaluates an idea's merit based on the division's priorities and the project's expected payoff. If the council approves a project, black belts and green belts are deployed like swat teams to the hotels to execute the project.
In the case of Unwind, one Chicago-based black belt and four in-house green belts gathered a group of leaders in January, 2005, from the Westin Chicago River North, including the directors of rooms, food and beverages, and sales, to brainstorm. Then the hotel's fitness director "came up and said, 'Why don't we do massage,'" says Peter Simoncelli, the hotel's general manager.
The team liked the idea and started to design the experience. First up was figuring out the logistics: getting the massage chairs, choosing the uniform of the masseuse, determining the best location of the massage table. In October, 2005, the hotel staged a dry run. The team quickly learned they had a problem: The guests wanted the complimentary massage to last longer than the hotel anticipated. "We had to come up with a diplomatic way of saying there is a limited amount of time in the massage chair," says Simoncelli. After completing the pilot in a few weeks, the Six Sigma team turned the project over to its hotel sponsor, in this case the director of rooms. Last year the hotel introduced the activity and found a nice surprise: Revenues from massages in the hotel spa jumped 30%.
After rolling out a prototype, green belts shift into analytical mode. At that point they spend a lot of time with the E-Tool, a proprietary Web-based system that allows Starwood to monitor a slew of performance metrics to gauge the success or failure of a new project. In the case of Unwind, the hotel kept close tabs on the massage revenue produced by each room. What's more, E-Tool enables hotel managers to rapidly spread and drive consistent execution of each project.
That's no easy task at Starwood, which owns, manages, or franchises 800 hotels, and rolls out new projects to its hotels every two weeks. Green belts enter every single project into the E-Tool, which currently contains 3,000 to 4,000 unique items. The entries are detailed and include photographs and descriptions of the projects as well as how-to instructions. The Unwind program alone produced 120 new features—one for each Westin hotel, including traditional fire dancing in Fiji and Chinese watercolor painting in Beijing. "I probably will make 50% fewer mistakes than if I had rolled out a project myself," says Simoncelli.
Savings in Safety and Energy
One project made mandatory for all North American hotels was a workplace safety effort. Starwood launched the initiative in early 2004 after executives noticed that workers' compensation claims were skyrocketing. A Six Sigma team discovered that the biggest cause of accidents were slips and falls, and housekeepers often suffered from back strains and other overexertions. The team developed a series of work processes, including a stretching routine required for all housekeepers and new cleaning tools with longer handles. Then it began tracking the amount of claims and the frequency of claim types. Thanks to the new regimen, Starwood slashed its accident rate from 12 to 2 for every 200,000 work hours.
The latest effort is an initiative to drive down the company's energy costs. Starwood is currently hashing out an internal mandate to require compact fluorescent lightbulbs in 75% of its rooms. There was a lot of resistance from hotel staff who felt the new bulbs would not provide the same type of light. But a Six Sigma group gathered and set up a dozen rooms with different bulbs. "We had top leaders figuring out which one was best," says Ballotti. "The collective power of getting these folks together is just amazing."
Click here to view the BusinessWeek slide show.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.