SafetySafety Talks

Alcoa CEO…The Greatest CEO Speech of the 20th Century?

By December 12, 2017 No Comments

A great safety speech isn’t about yelling orders and telling staff to improve safety and completely change their thinking or else. Instead, it’s a unique opportunity to motivate staff to work together and have open communications from the CEO down and unite for a common good of the group.

On October 1987 the new CEO of Alcoa gave his first speech in front of shareholders. The majority of CEO’s would use this time to pump up the shareholders and get them excited about how the company is going to increase profit margins while decreasing their costs…and therefore increase the value of the shareholders positions.

But that’s not exactly what Paul O’Neill had in mind…instead he began.

“I want to talk to you about worker safety.” In an instant, shareholders wondered why he had omitted to talk about improving profits. After all, Alcoa was in a mess and in dire need of some restructuring and repositioning for future growth.

“Every year, numerous Alcoa workers are injured so badly that they miss a day of work. Our safety record is better than the general workforce, especially considering that our employees work with metals that are 1500 degrees and we have 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.”

The audience was dazed and confused by this opening statement. They all sat and wondered how focusing on safety first was going to help increase the shareholder value and why Mr. O’Neill wasn’t coddling them and telling them what they wanted hear.

Someone eventually raised their hand and asked about inventories in the aerospace division and somebody else asked about the company’s capital ratios.

O’Neill did not waver, “I’m not certain you heard me. If you want to understand how Alcoa is doing, you need to look at our workplace safety figures. If we bring our injury rates down, it won’t be because of cheerleading or the nonsense you sometimes hear from other CEOs. It will be because the individuals at this company have agreed to become part of something important: They’ve devoted themselves to creating a habit of excellence. Safety will be an indicator that we’re making progress in changing our habits across the entire institution. That’s how we should be judged.”

When the speech ended the majority of the audience ran out of the room in a mass panic and basically rushed to sell their shares in Alcoa or inform their clients to sell sell sell!

Those shareholders that held on to their stock were rewarded because within a year of the speech Alcoa’s profits hit a record high. By the time Paul O’Neill retired in 2000, Alcoa’s market capitalization was 5 times higher than in 1987 and rose to 27 billion.

So what made O’Neill’s safety speech one of the best in the 20th century?

He started with “why”. As Simon Sinek says in the brilliant book, “Start with a Why”,great leaders communicate from the inside out. He started with a powerful “why”. O’Neill’s speech certainly got the attention of his audience. He then moved to “how” they were going to improve safety and then the “what”. Other leaders communicate the “what”, “how” and then the “why”. It would have been easy (and expected) for him to have just talked about improving sales and reducing costs (what) and then “how: they would do it. This would have kept shareholders and share brokers happy. Instead, he chose to talk about safety and become the champion for Alcoa workers.

One Behavior Change at a Time is how you have to start

As quoted in The Power of Habits, O’Neill said, “you can’t order people to change. That’s not how the brain works. So I decided I was going to start by focusing on one thing. If I could start disrupting the habits around one thing, it would spread throughout the entire company”.

He chose improving safety as the key habit to bring the entire company together. He chose a habit that would have everyone in alignment – unions and managers. And it meant total operational transformation.

Humans can only learn and remember so much information at once. The more information you give people – the more they can get paralyzed by it.

According to Chip and Dan Heath from “Made to Stick” creating a memorable message is all about stripping an idea down to its core.

O’Neill did this brilliantly when he focused the workforce on one aspect – safety. And then he made this memorable by creating the tagline “Zero injuries”.

The Power of the Group Mentality

Paul O’Neill also was able to encourage complete group behavior. By encouraging Alcoa workers to think of safety of the entire group rather than just individuals or just themselves, the entire workforce came together for one common goal.

The power of evolution has taught us that by living in groups or tribes, it can be most beneficial to attain and share what is necessary for our daily survival.

By harnessing the group mentality, O’Neill created a complete behavior change to embrace the goal and make decisions based on the entire group. Peer pressure is a very powerful resource if used in this atmosphere. Most people are followers and will do what is best for the group, not the individual, that’s just the way we’re wired.

Not once did O’Neill use the word ‘I’ in his speech as creating a safe workplace was never just about him spewing orders to others but rather about the entire workforce of Alcoa working together.

Another reason this speech was one of the best ever was the fact that by speaking in front of shareholders, he let his workers know that it wasn’t just about increasing profits and decreasing loses, it was about them, the workers, and creating a sharing, safe work environment for everyone. He immediately gained the trust and admiration of all his workers and this made the cultural shift a natural evolution.

He even took this further. According to Tim O’Bryan, in an article titled “Analytical Decision Making and the Alcoa Transformation”, O’Neill introduced a new company wide policy that whenever someone was injured, that the unit president had to report it to O’Neill within 24 hours and present a plan for making sure it never occurred again.

This opened up the floodgates of communication.

Workers began to tell their floor managers who relayed them to the VP and eventually the CEO about the injuries and also about the potential hazards that they could see. Eventually a suggestion box was set up and filled up very quickly. This made the entire feel some responsibility in creating the safest possible work environment.

Spare No Expense on Safety

O’Neill was of the mind-set that the only way to keep his employees safe was getting down to the root causes of why the injuries were happening in the first place. He never looked at safety training as an expense but rather an investment in his employees, bettering them and the company as a whole.

Finding the root causes was done by what is now a common Hazard Inspection that would be carried out on a regular basis. By also studying what was wrong within their manufacturing processes, and by training all employees on quality control and becoming more efficient, the habit of doing the job ‘right’ the first time also greatly improved their workplace productivity and safety.

Alcoa’s lost work days to injury per 100 workers fell from 1.86 to 0.2 and by 2012 it had fallen to 0.125

Paul O’Neill’s inaugural speech transformed Alcoa into the most efficient and safest aluminum company on the planet. The transformation of their safety culture also transformed their profit/loss balance sheet and 1 year after the speech Alcoa’s profits hit a record high.

Click here to watch the video of  Paul O’Neill’s speech