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Dated Manufacturing to Idea Machine:

How Better Communication means Increased Profits for Alcoa

Posted on April 08, 2016

When Paul O’Neill took over Alcoa, the Pittsburgh-based industrial giant, in 1987 it was a hundred-year old manufacturer with solid but boring financials and a disengaged workforce. He was brought aboard as an outside hire to shake things up in the dusty culture.

And, as promised, he did so from day 1. As recounted in The Power of Habit, instead of talking about new product lines, profits margins, and plans for increasing revenue, O’Neill fixated on one issue – improving worker’s safety. In his words, he had one goal overriding all the others: “I intend to make Alcoa the safest company in America. I intend to go for zero injuries.”

Investors were unimpressed. After the speech, one analyst called his 20 largest clients and recommended they sell because Alcoa had “put a crazy hippie in charge.” Safety seemed an enormous distraction to the analysts, the primary goal in business was to make money.

Those investors who sold Alcoa stock based on these recommendations made an enormous mistake. Profits at the firm hit a record high within a year of O'Neill's initial speech and when he retired from the company in 2000, annual net income and the company’s stock price had increased five-fold.

It is true that over the course of O’Neill’s 13-year tenure, Alcoa dropped from 1.86 lost workdays due to injury per 100 workers to 0.2. But the surge in profits at Alcoa went far beyond the reclamation of lost workdays. Why did a fixation on safety drive so much profit growth?


Improved Communications, Improved Profits

O’Neill was, by all accounts, relentless in tracking the number of injuries that occurred at Alcoa and had all major incidents reported directly to him. During his tenure, managers were graded on how many injuries occurred on their watch and injury numbers were posted publicly. In this fashion, improving safety was the guiding measure for the entire organization.

Because major workplace incidents and injuries were to be run directly up to O’Neill, internal communication improved to cut through the many layers of bureaucracy at the centennial company. Employees were encouraged to suggest safety improvements and told by O’Neill to call him at home if their managers did not listen to them.

This fixation on safety and improvement in communication to support it had a way of uncovering inefficient processes and divisions – the parts of the company that had the most injuries were, no surprise, usually the least efficient. There was usually a direct effect between making things safer and making operations more efficient.

The improved communication also had a way of unlocking hidden value within the company. One low-level employee working in aluminum siding department had an idea to radically improve efficiency and for decades was denied a means to suggest it. When his idea was finally put in place, profits in aluminum siding doubled.


Unlocking Employee Value

For those who deal in the cold hard reality of dollars and cents, concepts like “internal communications” and “employee engagement” can seem like warm and fuzzy novelties. But as Alcoa shows, these concepts can radically improve efficiency and drive massive profit growth.

The fact is employees often have tremendous insight into how to improve operations and only lack a means to communicate them to management. This is the goal of Vocoli’s employee suggestion software - to encourage communication, improve efficiency, and drive higher profitability for your organization.

Give your employees an outlet to communicate their efficiency-improving ideas by contacting the Vocoli team at 888-919-5300.

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