The cost of quality is one of the key concepts used in managerial finance to describe the ongoing of a business in terms of quality service and product development. As Feigenbaum, its originator, points out, “the ‘cost of quality’ isn’t the price of creating a quality product or service. It’s the cost of NOT creating a quality product or service” (Feigenbaum, 1991). Thus, this concept is related more to the problems that may arise during the functioning of a business.
In a certain sense it is interested more in the lack of quality of products and services that in the quality itself. In the case of hotel Escargo, it is the cost of the lack of quality services offered to the clients. What can be done differently to achieve higher levels of customer satisfaction is exactly what the cost of quality is interested in. In fact this is fully congruent with what the mission statement of Escargo states.
There are four tools and techniques that a manager can use to determine the cost of quality. They are “prevention costs, appraisal costs, internal failure costs and external failure costs. The first two are grouped within the larger category of the cost of conformance. The other two are grouped into the category of cost of non conformance” (Juran, 1962). In the case we are discussing of hotel Escargo, we shall use internal failure cost and, especially, prevention cost as methods of cost estimation. The internal failure cost will deal with the problems of the check in and check-out processes along with those of the room changing.
If we look at the scenario we will notice that the three of the mentioned services of the hotel are above industry’s quality standard time response requirement.
- Which areas of the Hotel Escargo you assume that should be improved within the next 3-6 months. Develop a strategy for ensuring these improvements.
Definitely the areas where hotel Escargo does need improvements are its system of managing the check-ins and check outs. If we do a revision of the data offered we see that for the check in process the standard is of 4 minutes of less, instead for Escargo is 4 minutes and 51 sec. For check-out the standard is of 2 min or less. Instead that of Escargo is of 3 min 17 sec. For the room change the industry standard is of about 6 min and that of Escargo is of 10 min and 29 sec. Clearly the hotel is not just above industry average, it is way out the normal expectancies of customers. This is especially true for the room change reaction time.
Here it must be noted that room change mainly happens because customers do not like their prepared room. That means that the hotel staff has not been attentive to customer’s desires and requests. A proper notation of these requests and desires would dramatically decrease the number of room changes, which would also decrease the problem of spending much time for changing it. In fact, business firms and companies are quite reluctant to satisfy customer requests and needs. They have understood that the key to success is through customer satisfaction (Gomez-Mejia, 2008).
In our case, the management team of the hotel should understand that customer satisfaction is directly connected to the check in and checkout timing.
The internal failure cost analysis will also point out that the date the survey was made there were 29 check–ins and 32 room changes. We find that the majority of the people requesting room changes were checked in the same day. That means they were dissatisfied with their rooms.
That is why the analysis of prevention cost is essential. This is “the costs of all activities specifically designed to prevent poor quality in products or services” (Campanella, 1999). The management at Escargo should begin by establishing new procedures for the check-in in order to prevent room changes, which are an added financial cost to the hotel. Especially if the customer reserves before by phone, or online, he should be required to give estimated time of arrival and credit card information. Information regarding his room preferences should also be requested. These are crucial data that will allow the hotel to properly respond to customers’ needs.
This data will be saved to the computer and all the work of the staff should be organized around them. The cleaning staff will schedule its room cleaning and preparations according to this data, the bellman also. So that when the customer arrives, the key is on the desk, the room is ready and the bellman waiting at the desk for him.
After he fulfills the ID card and signs it, the customer should be asked for the approximate time of leaving. This data will also serve as basis for the organization of the checkout process. The bellman should be ready for that time and the car pickup also.
These two measures described will dramatically shorten the check-in and check-out time.
As mentioned above, these measures will also influence the decreasing of the number of requests for room changes since room assignment will be made according to customer preferences taken before.
I would have done the same choice as Fred did for its work force trainings. I believe it is the most valuable response to the decisions and requests made by the management team of the company as a response to the rising competition from large retail stores. There are many aspects which evaluated do support the choice of Fred. The first and foremost reason is the fact that this third consulting company focuses its attention toward the achievement of customer satisfaction. The other two had no clear focus. One claimed that will train the sales team on customer skills. Nevertheless, that is a vague thing as it is not clear what do these customer skills include.
The other claimed that will train the sales personnel so that they make customers return back at the store. Yet, would they return because of satisfaction, because they did not feel well informed or because they want to return the items bought as they did not fit what they were looking for? Instead, customer satisfaction is a clear goal and is one of the most important elements in the success or failure (if it is lacking) for a company.
One smart thing to do is to request more details to the other two non-selected companies regarding the training they will provide. To the company pretending that will make customers return, Fred should ask to be more specific regarding the skills that it would provide to the sales personnel. Would it focus more on the technical aspects of the hardware components or would it focus more on the customer relations aspects? The same request should to be more specific should be made to the second company pretending to develop customer skills to the sales employees. It would have been more appropriate if it focused on developing key skills in achieving customer satisfaction.
Another thing Fred might do before selecting the training company is to acknowledge the feedback of the employees regarding the situation (Gomez-Mejia, 2008). As staff of the company they feel that rising competition is a threat to their company and, as a result, their job. Fred could make a survey and collect their feedback regarding the situation. The possible solutions they offer would add to the ones that the management team offered.
Thus, the company will find itself with more options. The sales staff is in daily contact with the customers. They know better than the management team what are customer requesting and what do they require. Fred can use this information to ask the training company to train the staff to develop certain skills that will respond to what customers are requesting.
I believe that the training would be successful and that it will influence the relationship the company forms with consumers. Forming a brand image in the market is one of the keys to success. This training will certainly help in forming that image since the sales employees are the one in contact with the customers and do form company’s image.
Campanella, J. (1999) Principles of Quality Costs: Principles, Implementation, and Use. (3rd ed.), ASQ Quality Press.
Feigenbaum, A. (1991), Total Quality Control (3 ed.), New York: McGraw-Hill.
Gomez-Mejia, R. (2008). Principles of Management, New York: McGraw-Hill.
Harrington, J. (1987) Poor-Quality cost. American Society for Quality publications.
Juran, J. (1962), Quality Control Handbook (2 ed.), New York, New York: McGraw-Hill.