How Alcoa quintupled their revenue by focusing on worker safety
How Alcoa quintupled their revenue by focusing on worker safety
Industry Insights
How Alcoa quintupled their revenue by focusing on worker safety
Discover how Alcoa's market value increased from $3 Billion to $27 Billion by focusing on one single habit: Worker Safety.
March 10, 2020
"Focusing on worker safety can transform an entire organization and dramatically improve culture, quality, productivity, communication, and ultimately profits."

This statement was Paul O'Neill's initial hypothesis when he took over as Chairman & CEO of the industrial giant Alcoa in 1987. By the end of his reign as CEO in 1999, he proved his non-consensus hypothesis increasing Alcoa's market value from $3 billion to $27.53 billion, while net income increased from $200 million to $1.484 billion. 

In this article, we'll dive deep into how O'Neill leveraged the power of safety to transform Alcoa into a more dominant powerhouse in aluminum manufacturing and cemented the idea that focusing on safety leads to positive transformative change within an organization. We'll also take a glance at safety by the numbers across North America, and what companies can do today to make worker safety a priority. 

Study of Alcoa

Alcoa Building

In 1987, Alcoa was in a state of decline and had faltered with failed product lines. Investors were worried about profit margins and revenue projections. They hired a new CEO named Paul O'Neill, who they hoped would solve all their problems around revenue and profit margins. Speaking at Alcoa's first board meeting, O'Neill started by saying, "I want to talk to you about worker safety." 

Humoring O'Neill, the investors sat quietly to see where he was going with this statement. "Every year, 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." O'Neill continued.  

Members of the board and other investors confused and bewildered how this related to inventories, production efficiency, and better suppliers or distribution.

O'Neill continued, "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."

"We're going to focus on safety over profits," O'Neill exclaimed.  

Investors and the board were in a panicked frenzy; one investor exclaimed: "The board put a crazy hippie in charge, and he's going to kill the company!". The same investor said he "ordered his other stakeholders to sell their stock before everyone else did." 

O'Neill knew he had no support going into this but went full force into implementing his hypothesis. 

O'Neill's Strategy

Focus on one critical metric, a "keystone habit."  In O'Neill's case, he wanted his key parameter for a measurement of success would be # of safety issues per day. 

O'Neill on his strategy, "I knew I had to transform Alcoa. But you can't order people to change. 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."

O'Neill focused on worker safety because he noticed that every time a safety incident occurred, an employee would miss work for days to weeks to months, which put a significant damper on productivity. When you have people with lost workdays, you have a labor and skills gap, which is the biggest hindrance in productivity. 

The strong emphasis on having workers prioritize safety over efficiency made a significant impact, Alcoa dropped from 1.86 lost workdays to injury per 100 workers to 0.2 lost workdays to injury per 100 workers. 

O'Neill introduced a method of following safety procedures before every job, emphasized that there must be protocols in place that ensure accountability. By using a series of on-the-job work instructions, safety checklists, task management, and safety leaderboards - Paul O'Neill was able to instill a progressive and transformative culture. 

One year after O'Neill implemented this, the company had reached a new record in terms of profits. 

O'Neill's focus on worker safety led to a thorough examination of an inefficient and dangerous manufacturing process. Focusing on one habit changed multiple habits within the organization that influenced processes related to quality, inventory, and overall OEE. 

Safety By The Numbers  

You can already see the impact Alcoa has had on private manufacturing:

According to the US Bureau of Labor Statistics, "The number of fatal work injuries in the private manufacturing industry declined 28 percent, from 420 in 2003 to a low of 303 in 2017. Workers in the private manufacturing industry experienced a total of 5,480 fatal injuries between 2003 and 2017. The highest annual count of fatal injuries during this period was 463 in 2004. Since then, the number and rate of fatal injuries have declined."

The most common types of fatal work injuries according to the US BLS:

  • Transportation
  • Contact with Objects & Equipment
  • Fall, Slip, Trip 
  • Exposure to harmful substances or environments
  • Violence and other injuries by persons or animals
  • Fire or explosion 

In 2018, there were 2.8 million nonfatal workplace injuries reported by various industrial industries. Days away from work, on average, were ~1 day per 100 FTE workers.

Incidence rates of days away from work cases and jobtransfer or restriction only cases, private industry, 2009-18

Number of nonfatal occupational injuries and illnesses by selected industry and case types, private industry, 2017-18 (thousands).

How Companies Today Can Focus On Safety

An important takeaway from both the Alcoa story is that focusing on the person implementing the process has more quantifiable benefits than trying to optimize a process. By looking at safety by the numbers, you can see what metrics to measure your safety by and also see common reasons why safety incidents happen and give you a baseline to identify your root causes of safety. So if you're looking at how you can apply this to your operations, focus on one thing that you want to improve that's not monetary; quality and safety are two potential options to focus on:

  • Quality

Quality is an essential part of your operations. Still, if you make it the main goal, then you could see a massive improvement in customer satisfaction, which can, in turn, improve the value you offer your customers = profit.

Metrics to measure: # of defects, # of returns, # of rework. 

  • Safety

Safety helps propel workers to be hyper-focused on the following procedure, which in turn affects everything down the supply chain.

Metrics to measure: # of safety incidents

The other aspect of implementing a keystone habit to focus on is figuring out how to execute this most seamlessly. Investing in a performance support tool, like WorkClout, is the best way to start this transformative metamorphosis of your culture and operations. 

WorkClout Performance Support Software

WorkClout is a mobile & web application that helps industrial workers get better at safety by centralizing performance tracking, tasks, on-the-job work instructions, skills training, & communication. 

Training, Quizzes, Certifications
Task and Procedure Management

Operators can focus on specific tasks assigned to them related to safety and procedures. Implementing WorkClout can help you scale the transformation in a matter of weeks rather than months. If you want to see how WorkClout can help your organization implement a keystone habit, feel free to schedule a call with one of our industry experts here. 

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