[The Baltimore Sun]
Bill Marriott has a nightmare.
A man loses a $40 bottle of cologne at a Marriott hotel. He calls the front desk. The assistant manager says he is not authorized to reimburse him. The customer contacts the hotel manager, then a company vice president, then the corporation’s legal department, and finally he writes the chairman. All in search of someone at Marriott who can and will give him his $40.
The worst part is that it happened not too long ago.
“By the time the $40 got to this poor fellow he was totally mad, exasperated and upset,” said J. Willard “Bill” Marriott Jr., 57, chairman and president of Marriott Corp., in an interview Thursday. “It could have been handled on the spot, and he would have gone away happy and been a loyal customer. As it was, we probably lost him by bungling his problem.”
The point of the story has not gone unnoticed at Marriott and beyond.
Analysts and others who track corporate structure maintain that if Marriott and other would-be industry giants are to remain competitive, they must rediscover how to open the flow of information from the front lines to the boardrooms and back again.
Although heavy with management layers and corporate rules, these companies must somehow become as nimble and creative as competitors a fraction of their size. And unless the decision-making power is spread down to the employee in the field, service companies dependent on their corporate images and on pleasing the public can suffer a slow death as consumers tire of gearing. “I’m sorry, it’s corporate policy.”
Marriott, for one, thinks it has an answer.
In an announcement Monday, the Bethesda-based hotel giant said it was giving the boot to its Roy Rogers fast-food chain and other regional restaurants in a bid to “restructure” and “streamline” the company for the 1990s.
It said it was giving up on the company’s financial sluggards to concentrate instead on those fastest-growing divisions that could make it the biggest and the best in the lodging and food-service “mega-markets.”
In sum, Marriott said it wanted less corporate interference in the field, fewer decentralized functions and fewer operating divisions.
Although the most obvious changes that will reshape Marriott — and the ones most focused upon initially by Wall Street — are the sale of its fast-food and sit-down restaurants, a more subtle, behind-the-scenes change to the company’s organization and philosophy is likely to have just as much impact on the 62-year-old company.
After a yearlong study by a task force of about 10 top managers, the company decided it was time to heed the lessons evident in the Japanese style of management, which in recent years has recently been cropping up in U.S. manufacturing facilities.
From now on, when a Marriott “strategic business unit” looks to build a hotel or enter a new field, the bulk of the decision-making authority will be in the division’s hands rather than at the corporate level as it was before. The executive in charge of the unit will be able to turn to his own architecture and construction unit, marketing services division and information systems group — responsibilities previously consolidated within the corporate hierarchy.
In addition, Marriott has divided its lodging division into two parts: one for its higher-end hotels and resorts, and one for the Fairfield Inn, Courtyard and Residence Inn units.
The company also moved Host International, its airport restaurant operator, from Santa Monica, Calif., to its Bethesda headquarters. Because of similarities between Host and the company’s Travel Plaza Division, which primarily operates restaurants on the nation’s highways, the two units were combined into the Host/Travel Plaza division under a single vice president.
Similar steps were also taken in Marriott’s contract food service unit, where the education and health care segments were united. The company kept a separate division for its contract services to businesses and industries.
Although the company will lose about 54,000 employees in the units it is selling, Mr. Marriott said he does not expect the organizational changes to result in layoffs. Anticipated cost savings, he said, would come from efficiencies stemming from smoother internal reporting methods and new computer systems the company is putting in place.
The company is doing these things, Mr. Marriott said, in the name of becoming a leaner, more efficient giant that is able to provide more specialized and flexible service to its customers.
“If there’s a policy that says we can’t do something,'” Mr. Marriott said. “and it’s obvious that that policy should not be followed and the customer would be made happy at a result of [its not being followed], the customer should be made happy.”
The job of easing controls, however, is not an easy as simply loosening the reins. At Marriott in particular, the accent has never been on individualism and risk-taking, but on minding the store and following a well-worn path.
Indeed, some analysts questioned whether things can be changed as easily as Mr. Marriott suggests.
“It’s an easy decision to come to that there is some trimming that can be done,” said John J. Rohs, an analyst who follows the company for Wertheim Schroder & Co. “And certainly there is obviously a very high corporate esprit de corps. People are very proud to work for Marriott.
“At the same time,” he said, the employees have become used to the feeling at the company that “’We’re all rated equal, and some are more equal than others.’”
Experts who study corporate management techniques and structure warned that tinkering with well-established links within a company can be a dangerous game, as new rules replace old ones.
“It calls for an exceptionally competent leader,” said Edwin A. Locke, chairman of Management and Organization at the University of Maryland’s College of Business and Management. “He can be too dictatorial and ruin it, or too loose and destroy the parts. You can’t have total anarchy. That’s the tricky part, making sure you don’t work against yourself, for example, when two sales units bid against each other.”
Major change in Marriott’s mode of operation would be quite a jump for a company with an entrenched reputation for living and breathing by its encyclopedic rule books.
The company goes so far, for example, as to detail 66 steps that should be followed when cleaning a room. It has a corporate recipe book stipulating ingredients, the sizes of plates to be used for each dish, the quantity of portions and what garnishes to use with each meal.
Behind these rules and tight-fisted control is the company’s zealous drive for consistency. For most of Marriott’s history, the rules have been the company’s salvation as it has pursued the most aggressive expansion program of any company in the industry, analysts said.
Since 1980, the company has more than quadrupled the number of its hotel rooms, to 127,695. It has nearly four times the number of employees, with 230,000 – 14,000 in Maryland. And corporate revenues have grown to more than $8 billion this year – including the divisions slated for sale – compared with $1.7 billion nine years ago.
But the company’s rapid expansion — rather than loosening the grasp of Mr. Marriott on the company’s day-to-day operations and those in the field — made the company squeeze even tighter.
Unlike many hotel chains that franchise their units and leave the hotel’s management — and quality — solely dependent on the new operators, Marriott insists on managing each hotel it builds, even though it only owns about 5 percent of them.
But what’s good for a fast-growing company churning out rubber-stamped products throughout the world is not necessarily good for a hotel chain diversifying into several levels of service and creating specialized products for its customers.
“To specialize, you have to be very, very close to your customer to know exactly what they want,” said Margaret M. Blair, a research associate at the Brookings Institution. “Exactly what you don’t want is any bureaucratic kind of hassle. You precisely want to get away from the very things that make you efficient, and that includes the rules about how you do things and how to do it the same every time.”
Mr. Marriott, asked about the decentralization of the company, said the changes are intended to make employees feel they have as much at stake in its future as he and his family have had in the past.
That does not mean, however, that the well-known Marriott rule books and be abandoned.
“I think the key to decentralization is to standardize as much as you possibly can in things that should be standardized and give empowerment to employees who are dealing with customers to satisfy those customers’ needs,” Mr. Marriott said.
But with the freedom to make decisions also comes risk. When lower-level managers risk failure by setting their own rules and making decisions aimed at helping the parent company, both rewards and penalties must be exacted, he said.
As a result, he said, the company would spend more on incentive compensation in the form of both cash and stock to place the employees’ financial fate in their own hands, thereby helping spur employees to do a better job.
The company’s recently announced search for greater specialization is both a cause and an effect of its decision to shed operations that would otherwise divert attention and sap its managerial strengths, Mr. Marriott said.
On the surface, the last thing Marriott would seem to be familiar with is shrinking its size. As the world’s largest operator of hotel rooms, the company said it would spend $1.5 billion a year over the next five years, aiming to add about 500 hotels and increasing the number of its senior citizens’ living centers from 12 to 150 within five years. It expects to grow about 15 percent to 20 percent a year and reach sales, excluding divisions that are to be sold, of $7.5 billion next year.
But the idea of strategically trimming the company’s bulk is not a wholly new concept at the company. Since the younger Mr. Marriott first became an executive at the company, he said, he has employed a consistent strategy of paring those assets or properties that were not succeeding.
That practice has also been apparent with Marriott’s acquisitions.
For example, after buying Howard Johnson Co. in 1982 for a total of $379 million, including the assumption of debt, Marriott only kept 418 of the company’s 617 restaurants. Marriott immediately sold Howard Johnson’s 199 franchised restaurants and 500 hotels and lodges for $287 million.
Marriott also has a tradition of admitting its mistakes. After struggling to make a go of its Sun Line cruise ships for 16 years, the company gave up and sold them in 1987. Similar reasoning put Marriott’s two Great America theme parks on the block in 1984 and 1985.
So, in a move that analysts said typifies the company’s style, Marriott once again decided to avoid a battle it believed was not worth fighting.
The company said it expects to sell its 365 company-owned Roy Rogers restaurants, with annual sales of about $400 million, and its 434 family restaurants, including Bob Big Boy, which account for about $440 million in revenue.
In doing so, the company abandoned its attempt to become a major player in the national fast-food and sit-down restaurant business. Marriott had been attempting to unify its many family-style restaurants under the single name Allie’s, the nickname of Mr. Marriott’s mother.
The company also announced Monday that it had completed the sale of its $900 million airline catering business, founded in 1937, to Caterair International, a company that includes several of the former division’s senior management.
Marriott said it would keep its Washington-area Hot Shoppes for what Mr. Marriott described as “auld lang syne.” Marriott, begun by Marriott’s father, J. Willard Marriott Sr., started as a single Hot Shoppe in 1927.
The new Marriott will consist of its $3.5 billion lodging division, a $2.3 billion contract services unit – which provides food and services to businesses, education and health care facilities, and $800 million restaurant unit serving airport and turnpike travelers.
Perhaps the most striking example of change to sweep through the company’s executive office is Mr. Marriott’s revised travel schedule. Discussing his plans and work schedule from a couch in his sixth-floor office, Mr. Marriott suggested it was time to spread the work to his younger brother, Richard E. Marriott, vice chairman and executive vice president, and others in the executive suite.
Part of the reason is a heart attack he suffered a few months ago. But another part appears to be a belief that it is time in let others make more of the decisions.
“We want these executives to develop as all-around businessman and we don’t want them to become just operational managers,” Mr. Marriott said. “We want them to think about the importance of capital. We want them to become more involved in marketing, to become more involved in human resource planning. We want them to run their businesses as if they were their own business.”
And what will he be doing?
“I would hope that we’d be smart enough to figure out how to keep my time in the office not as long or as fast and furious as it has been,” he said. “You just can’t do that and run a big company and do the things you need to do at home.”
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Marriott also trimming relocation plans
Nearly two years ago, Marriott Corp. said it was looking to build a new corporate headquarters on 210 acres in Germantown in Montgomery County.
The company was contemplating on office complex of 3 million square feet, representing one of the single largest developments of its kind in the region. The idea was to combine under one roof the 4,000 employees at its headquarters and 2,000 administrative workers scattered throughout the state.
Although an announcement is expected within the next three weeks regarding the fate of that project, J. Willard Marriott Jr., the company’s chairman and president, said Thursday it would be nowhere near the size of the earlier estimates.
“We originally contemplated moving out of this building and moving everything up there and we have decided not to do that,” Mr. Marriott said. “Whatever we do up there, it will not be on the scale of the original design plan.”
Part of the reason for the change of heart stems from an earlier decision to sell and then lease back its current 800,000-square-foot headquarters in Bethesda. After selling the building for $155 million, the company signed a 15-year lease in June with the new owners and has a number of renewal options that could keep Marriott at its current address far into the 21st century.
A more recent decision to abandon its original plans comes as a result of Marriott’s announcement Monday to shed its Roy Rogers and family restaurants, as well as a previously announced plan to sell its In-Flight food service division.
While the vast majority of the three divisions’ 54,000 employees are in the field, some of its headquarters building would be freed up as a result of the units’ sales. Overall, Marriott had 230,000 employees worldwide before the divestitures.
In the meantime, the company has been working with Montgomery County officials to subdivide the Germantown parcel, readying at least some of property for sale to other developers. The quandary facing the company, Mr. Marriott said, is what to do with the rest.
“If you’re going to build a huge complex for yourself, you can afford to spend a little bit of money on roads and sewer and traffic lights and all those things,” he said. “Whereas if you’re going to build a smaller building you can’t, and that is what we’ve been working on and that’s the dilemma we have faced.”