A lesson learned from Alcoa as told by Charles Duhigg in ‘The Power of Habit’

 It was just a few months ago I’ve finally to finished reading ‘The Power of Habit’ by Charles Duhigg. It left a mark. I know that because I find myself referring back to it way more often than my friends would approve. The author makes a great job at giving real-life examples of how to use habits to improve the way we live and work. I want to share with you one story that got a lot of attention over the years. It’s a story of how focus and habit have the power to ignite massive change even in a big manufacturing corporation, a complex environment where change is never easy and always comes with a risk.

A Blast From The past

In 1987, the Aluminium Company of America (known as Alcoa) was not doing so well. As one of the largest manufacturers of raw aluminum in the US, in charge for everything from Coca-Cola cans, Hershey’s Kisses wrappers to jet engine parts, efficiency was waning and both investors and employees were unhappy.

To help turn things around, the board brought on Paul O’Neill as a promising new CEO.

“I want to talk to you about worker safety,” Paul started his first speech to the investors.
“Every year, numerous Alcoa workers are injured so badly that they miss a day of work. Our safety record is better than the general American workforce, especially considering that our employees work with metals that are 1500 degrees and machines that can rip a man’s arm off. But it’s not good enough. I intend to make Alcoa the safest company in America. I intend to go for zero injuries.” (p.97)

The audience was stunned. At the time, his discourse had nothing to do with what was expected from a newly appointed CEO of a large manufacturing company. There was no promise of boosting profits and lowering costs, nothing on taxes and no buzzwords like “synergy,” “rightsizing,” and “co-opetition”. Despite the turmoil of the audience, he continued:

The investors went ballistic. As soon as the speech was over, one immediately advised his clients to sell all Alcoa stock: ‘The board put a crazy hippie in charge and he’s going to kill the company’. That same investor later admitted it was ‘the worst piece of advice I gave in my entire career’. (p.99)

By the time O’Neill retired in 2000, the company’s annual net income was five times larger than before he arrived, and its market capitalization had risen by $27 billion. What’s more important, all that growth occurred while Alcoa became one of the safest companies in the world.

But how?

The Power of Safety as a Keystone Habit

What Paul O’Neill did was focus on an issue that concerned both the executives and employees – worker safety – and harness it as a basis for change. He was able to rapidly implement structures and habits that not only reduced factory injuries and deaths but significantly transformed Alcoa’s entire business culture – lowering costs, improving quality, productivity and overall profitability.

Duhigg refers to the focus on health and safety adopted by O’Neil as a keystone habit.

A keystone habit is one that indirectly impacts a range of seemingly unrelated habits to create a benefit far greater than the sum of its parts. For example, “if molten metal was injuring workers when it splashed, then the pouring system was redesigned, which led to fewer injuries. It also saved money because Alcoa lost less raw materials in spills. If a machine kept breaking down, it was replaced, which meant there was less risk of a broken gear snagging an employee’s arm. It also meant higher quality products because, as Alcoa discovered, equipment malfunctions were a chief cause of subpar aluminum.” (p.108)

To improve worker safety, O’Neil expected incidents to be meticulously documented, communicated and resolved, bridging the gap between high-level decision makers and low-level factory workers. This gave place to new ideas and empowered workers to take responsibility for their role in the supply chain.

O’Neill left Alcoa in 2000, but the legacy of his keystone habit lives on. In 2010, 82% of Alcoa locations didn’t lose one employee day due to injury, close to an all-time high. On average, workers are more likely to get injured at a software company, animating cartoons for movie studios, or doing taxes as an accountant than handling molten aluminum at Alcoa.

The Takeaways

• Safety can transform an entire company, dramatically improving culture, quality, productivity, communication, and profits. CEOs and business leaders who understand this and focus on safety achieve some of the greatest business success.
• Establishing an organizational habit of suggesting safety improvements had created other habits, as well: recommending business improvements that otherwise would have remained out of sight. By shifting worker safety habits, O’Neill had created patterns of better communication. He set in motion a chain reaction that, in the end, increased profits.
• What Alcoa’s story tells us is that you don’t have to grapple with multiple ingrained habits to see remarkable self-improvement. By focusing on reprogramming one keystone habit, wider change occurs as a natural by-product.
• Studies indicate that keystone habits can have the same impact on peoples’ lives, as well. Duhigg writes ‘typically, people who exercise start eating better and become more productive at work. They use their credit cards less frequently and say they feel less stressed. It’s not completely clear why. But for many people, exercise is a keystone habit that triggers widespread change.’ (p.109)

On a mission to improve safety and operational risk management in your organization? Get to know us, we’re trying to do the same.