Measuring Benefits of Six Sigma at Starwood
-
Upload
vijaybijaj -
Category
Documents
-
view
4.331 -
download
1
description
Transcript of Measuring Benefits of Six Sigma at Starwood
Measuring Benefits of Six Sigma at Starwood
Six Sigma Conference: Service and Transactional Environments
Scottsdale, AZ
October 21, 2005
2
Six Sigma at Starwood: Measuring Benefits
Ying Shiau - introduction
Current responsibilities as VP, Global Six Sigma Provide and oversee Six Sigma support on corporate initiatives Improve credibility of Six Sigma financials via policy setting and project audits Provide management reporting on Six Sigma initiatives, benefits and costs Encourage coordination and best practice sharing between Six Sigma divisions Enhance Six Sigma perception via internal communication vehicles
Industry Experience Hospitality: Hyatt, Hilton International, Morgans Hotel Group, Citigroup Food
Services Consulting: Accenture Brand Management: Colgate-Palmolive, Accenture CRM
Functional Experience Strategic planning, business analysis Branding, marketing Operations: hospitality, food service
Contact Information [email protected] 914-640-4411
3
Six Sigma at Starwood: Measuring Benefits
Table of Contents
Overview of Starwood
Benefits Calculation
Looking Ahead
4
Six Sigma at Starwood: Measuring Benefits
Starwood owns and manages over 750 hotels and vacation ownership properties around the world.
Starwood’s Brands and Properties
• 389 hotels and resorts
• 57 Owned, 169 Managed
• 133,884 rooms
• 67 countries
• Well-known global brand
• 121 upper upscale hotels
• 36 Owned, 56 Managed
• 51,579 rooms
• 27 countries
• “Modern Luxury” brand positioning
• 131 hotels
• 7 Owned, 12 Managed
• 23,158 rooms
• 21 countries
• Full/Select Service
• 10 hotels and resorts
• 5 Owned, 5 Managed
• 2,090 rooms
• 5 countries
• Ultimate luxury and customized experience
• 42 hotels and resorts
• 8 Owned, 19 managed
• 6,067 rooms
• 15 countries
• Historical or legendary landmarks
• 20 hotels
•12 Owned, 8 Managed
• 5,786 rooms
• 5 countries
• World’s first chain of designer boutique hotels
• 16 vacation ownership resorts
• 4,500 units
• 6 countries, plus Bahamas, US Virgin Islands and Mexico (under construction)
• One of top 5 US timeshare companies
5
Six Sigma at Starwood: Measuring Benefits
Why Six Sigma? Hospitality has many repetitive processes.
Common Hotel Processes
Reservations
SalesReception/Front Desk
Housekeeping
Engineering
Food and Beverage
Security/Safety
• Sales calls• Lead qualifications
• Meeting arrangements • Parking• Check in• Concierge• Check out
• Guest room cleaning• Meeting room cleaning• Public area cleaning• Laundry
• Repair• Maintenance
• Restaurants, lounges• Room service procedure• Receptions, meetings
• Call centers• Web sites
6
Six Sigma at Starwood: Measuring Benefits
Why Six Sigma? We as a company value innovation.
“The best way to predict the future is to invent it.” Alan Kay
Winning Starwood Innovations
7
Six Sigma at Starwood: Measuring Benefits
Why Six Sigma? We as a company seek to rebalance some long-established ways of thinking and working.
Growing Challenges in Hospitality Industry
• Issues more complex• Customer demands• Competitive pressure
Need for a Cultural and Mind Shift
Art
Knowledge and experience acquired from past roles
Gut, intuitive decisions
Quick decisions and actions
Science
Advanced management techniques applicable to any situation, new and familiar
Data-driven decisions
Structured problem-solving
8
Six Sigma at Starwood: Measuring Benefits
Since 2001, Starwood has continued to strengthen our Six Sigma program.
2002-3 2004-6
Six Sigma Journey at Starwood
Cha
lleng
es • Greater demand for Six Sigma involvement in major projects
• Six Sigma way of working advances at a different pace in different parts of the organization
• Strong alignment with senior leadership priorities
• Program delivers material impact to EBITDA margins –more ambitious stretch goals
• Growing number of Best Practices - Core processes redesigned - cross-divisional transfers
• Post Sept 11, Six Sigma associated with cost cutting
• Six Sigma perceived as separate group• Benefit calculation approach not well defined• Projects with limited transferability
• Projects launched and improvement tracked
• Greater focus on divisional and regional best practices
• Improved benefit calculations, dashboards in place
• Six Sigma experience viewed valuable
• Program launched - great talent in new roles
• People trained, processes mapped and measured
• First projects begin delivering benefits to P&L
Acc
ompl
ishm
ents
2001
9
Six Sigma at Starwood: Measuring Benefits
Table of Contents
Benefits Calculation
Looking Ahead
Overview of Starwood
10
Six Sigma at Starwood: Measuring Benefits
When Six Sigma was first launched, not all project teams applied rigor to benefit calculations.
Downward Trend of Financial Benefits Calculated
2002 2003 2004 2005-
20,000
40,000
60,000
80,000
100,000
120,000
1 2 3 4
$-
$10
$20
$30
$40
$50
$60
-
20,000
40,000
60,000
80,000
100,000
120,000
1 2 3 4
$-
$10
$20
$30
$40
$50
$60
Number of Projects
Benefit Calculations
11
Six Sigma at Starwood: Measuring Benefits
Questionable credibility of our financials undermined buy-in from our key leaders.
Spotty Credibility
Reduced confidence in
Six Sigma methodology
Difficult to get continuous
investment in the program
Difficult to tell a good story to investment community
Reduced willingness to
support Six Sigma projects
Difficult to recruit and keep Six Sigma team
Impact of Questionable Benefits
12
Six Sigma at Starwood: Measuring Benefits
In 2003, we put in place a new set of guidelines and support for benefit calculations.
Defi
nit
ion
s
Targ
ets
Dash
board
Ch
ecks &
Bala
nces
Six Sigma Benefit Calculations
Benefit Calculation Components
13
Six Sigma at Starwood: Measuring Benefits
Type 1 is our most tangible financial benefit from Six Sigma projects.
Tied directly to P&L
Quantifiable cause and effect between project deliverable and reduction increase in one or more GL during a specified period
Calculation inputs sources from accounting system
NO assumptions: If an assumption is needed to calculate the benefit, it is not considered Type 1
Project types
Revenue generation
Cost reduction
Cost avoidance
Target goal: Type 1 benefits to meet or exceed 1.5 times Six Sigma expenses
Type 1 Benefits Definition
14
Six Sigma at Starwood: Measuring Benefits
Type 1 Benefit Project Sample
Situation Hotels faced rising costs associated with laundering of linens and towels Rising trend in consumer concern over environmental issues
Green Room Solution Guests decide if they wanted bed linen and bathroom towels changed by
placing a gray card on their bed
Financial Benefits: Type 1, Cost Reduction
- Cost savings in laundry, with volume dropping 25% Additional benefits
- Maid productivity increased- Positive guest reaction to participation in environmental initiative
Green Room Program
15
Six Sigma at Starwood: Measuring Benefits
Type 2 is another financial benefit type, which is a secondary focus.
Have a financial impact but cannot be tied to P&L during a specified period
Most involve future focused revenue processes (e.g., group room conversions from tentative to definite vs. actualized bookings
Requires approval before project is tollgated to Control for baseline and financial benefit calculations
Type 2 Benefits Definition
16
Six Sigma at Starwood: Measuring Benefits
Type 2 Benefit Project Sample
Increase Sales Lead Conversion
Situation
Sales managers not able to quickly identify regional options for group booking leads
Solution: provide sales managers with the ability to cross-sell and book all participating properties in region in a live system
Financial Benefits:
Type 2, Revenue Enhancement
Higher rate of leads conversion: Increased bookings and market share for the region
Benefits are measured from revenues from group bookings turned “definite” rather from when they actually stay at the hotel.
17
Six Sigma at Starwood: Measuring Benefits
Non-financial benefits are tracked by project but not translated into financial benefits.
While improvements in non-financial measures are important, no attempt will be made to convert them into financial values
- Too many assumptions; quantification hard to prove
Types of non-financial projects Reduction of variability in processes, e.g., room check in and out,
room service, housekeeping, etc. Reduction of risk exposure Productivity improvements without headcount loss Guest satisfaction Employee satisfaction Increased yield and conversion
Non-Financial Benefits
18
Six Sigma at Starwood: Measuring Benefits
Non-Financial Project Sample
Situation High guest complaints due to room assignment issues
Solution Updated check-in procedures More accurate room scheduling Increased training
Non-Financial Benefits Increased guest satisfaction by reducing number of defects e.g.,
- “did not receive requested bed type or room type,” - “upgrade not available.”
Reduce Room Assignment Defects
19
Six Sigma at Starwood: Measuring Benefits
A standard automated dashboard was created to help track key measures and benefits.
Standardizes how we capture and track key measures and benefits
Reduces BB workload by providing standard dashboard template
Reinforces Six Sigma principles (tutorial, help application)
Provides clear benefits view for a range of interested parties Six Sigma leadership: VP, MBB, etc. Operations: General Manager, Regional VP, Process Owner,
Controller, etc.
Performs automatic functions Control charts of key measures Baseline and benefit calculations, means, standard deviation,
sigma levels, etc. Calculation of financial benefit entries into project database
Benefits of our Dashboard
20
Six Sigma at Starwood: Measuring Benefits
Sample Dashboard
Output and Financial Measures
Input and Process Measures
Operational Definitions
Universally applicable to all projects
Tutorial and help application
Statistical tools: control charts, sigma levels
21
Six Sigma at Starwood: Measuring Benefits
Sample Control Chart
22
Six Sigma at Starwood: Measuring Benefits
Key individuals throughout the organization ensure adherence to these financial guidelines.
Checks and Balances
Six Sigma Financial Analyst:
Monitors adherence
MBB/BB:
Guides on benefit
calculation formula
Process Owner:
Gathers data calculation
benefits
Hotel Controller:
Validates benefits
Auditor:
Monitors adherence
during audits
Divisional Controller:
Determines BP calculation
23
Six Sigma at Starwood: Measuring Benefits
Table of Contents
Looking Ahead
Overview of Starwood
Benefits Calculation
24
Six Sigma at Starwood: Measuring Benefits
We will continue to evolve Six Sigma at Starwood for continuous program improvement and alignment with company priorities.
Select Starwood Priorities
Continued focus on productivity and profitability
Building World Class Brands
Sales Capability Initiatives
Leaner corporate management team
Improved market share and EBITDA margins
Six Sigma Priorities
Continuing to do more projects on productivity and profitability
Brand and Sales initiatives managed with support from BBs globally
More Best Practices and cross-divisional transfers
Continue to train and grow Green Belt community throughout Starwood
Continue to refine guidelines, processes and tracking for benefits
25
Six Sigma at Starwood: Measuring Benefits
Q & A?