How to start a chain reaction that results in higher profitability

1: “You can’t order people to change. That’s not how the brain works,” Paul O’Neill reflected.

As the new CEO, his goal was audacious: to transform Alcoa, the Aluminum Corporation of America, a Fortune 500 company that has existed for more than 100 years.

His predecessor had tried to mandate improvements.  That didn’t go so well. Fifteen thousand associates had gone on strike, bringing dummies to company parking lots, dressing them like managers, and burning them in effigy.

“Alcoa was not a happy family,” Charles Duhigg writes in The Power of Habit.  “It was more like the Manson family, but with the addition of molten metal.”

2: Paul had an idea, however: “I decided I was going to start by focusing on one thing.” He believed in the power of “keystone habits”.  “Some habits” matter more than others in remaking businesses and lives.” Keystone habits demonstrate success “doesn’t depend on getting every single thing right, but instead relies on identifying a few key priorities and fashioning them into powerful levers,” Charles writes.  “The habits that matter most are the ones that, when they start to shift, dislodge and remake other patterns.”

Paul searched for a lever, something all stakeholders, including unions and management, would agree was important.  To change how people worked and communicated he would need to bring people together to create leverage.

“I went to basics,” Paul remembers.  “Everyone deserves to leave work as safely as they arrive, right? You shouldn’t be scared that feeding your family is going to kill you.  That’s what I decided to focus on: changing everyone’s safety habits.”

Soon after becoming CEO, he communicated improving worker safety would be his primary focus: “There’s one thing I’m never going to negotiate with you, and that’s safety. I don’t ever want you to say that we haven’t taken every step to make sure people don’t get hurt.  If you want to argue with me about that, you’re going to lose.”

The power of this approach is that no one wanted to “argue” about safety.  The unions had been pushing for better safety rules for years.  Managers knew accidents resulted in lost productivity and low morale.

Paul announced his goal: Zero injuries.  Period.  Whatever it took.  Whatever it cost.

The genius of this goal was that it would require “the most radical realignment in Alcoa’s history,” Charles writes. 

It began with understanding why injuries happened in the first place.  To understand why injuries happened necessitated studying how the manufacturing process went wrong.  “To understand how things were going wrong, you had to bring in people who could educate workers about quality control and the most efficient work processes,” Charles writes, “so that it would be easier to do everything right, since correct work is also safer work.

“In other words, to protect workers, Alcoa needed to become the best, most streamlined aluminum company on earth.”

3: Paul’s safety plan was in reality a version of the habit loop : cue, routine, reward.  The cue was an injury.  The new routine required the unit president to notify the CEO within twenty-four hours and present a plan to ensure the injury would never happen again.  The reward?  Only those who embraced the new system would be promoted.

Unit presidents are busy.  To contact the CEO within 24 hours with a plan of action required the unit president to hear about the accident immediately.  To make that happen, “each unit had to build new communication systems that made it easier for the lowliest worker to get an idea to the loftiest executive, as fast as possible,” Charles writes.  “Almost everything about the company’s rigid hierarchy had to change to accommodate [the new CEO’s] safety program.”

Those changes were just the start.

“As Alcoa’s safety patterns shifted, other aspects of the company started changing with startling speed, as well,” notes Charles.  “Rules that unions had spent decades opposing—such as measuring the productivity of individual workers—were suddenly embraced, because such measurements helped everyone figure out when part of the manufacturing process was getting out of whack, posing a safety risk.

“Policies that managers had long resisted—such as giving workers autonomy to shut down a production line when the pace became overwhelming-were now welcomed, because that was the best way to stop injuries before they occurred.”

Paul never promised that focusing on worker safety would increase Alcoa’s profits.  However, as new habits, processes, and systems moved through the organization, costs came down, quality went up, and productivity skyrocketed.

The new mindset even took hold outside of work.

“Two or three years ago, I’m in my office, looking at the Ninth Street bridge out the window, and there’s some guys working who aren’t using correct safety procedures,” recalls Jeff Shockey, Alcoa’s safety director at the time.  “One of them was standing on top of the bridge’s guardrail, while the other held on to his belt. They weren’t using safety harnesses or ropes.  They worked for some company that has nothing to do with us, but without thinking about it, I got out of my chair, went down five flights of stairs, walked over the bridge and told these guys: ‘Hey, you’re risking your life, you have to use your harness and safety gear.'” 

The bridge workers explained their supervisor had forgotten to bring the equipment.  So Jeff called the local Occupational Safety and Health Administration office and reported the incident. 

More tomorrow.

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Reflection:  Apply the idea of “keystone habits” to my organization.  What is one area to focus on that might snowball into other innovations across the organization?

Action:  Lead a discussion with my team or with a colleague about the question above.

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