Hi all,
Imagine you’re an investor sitting in a fancy hotel ballroom around the corner from Wall Street, waiting to hear a speech from the new CEO of the aluminum company you’ve invested in. The company’s performance has been poor for the past few years, and the board thankfully decided recently that it was time for new leadership. You sit there expecting that the new CEO is going to speak about how he will turn the company around, improve profits, and of course, raise stock prices.
Instead, he says this: “I want to talk to you about worker safety”. He then proceeds to explain that every year, many workers from the company, Alcoa, are injured so badly that they have to miss a day of work. He outlines his intention to make Alcoa the safest company in the United States, and his intention to aim for zero injuries.
You feel confused. You and others raise your hands, asking questions about capital ratios and inventory levels. The new CEO then says, “I’m not sure you heard me. If you want to understand how Alcoa is doing, you need to look at our workplace safety figures”. You and others clear the room quickly, thinking this man has lost his mind.
This scenario happened in October 1987, when Paul O’Neill took the helm of the struggling aluminum giant. Over the course of the next thirteen years, he transformed the company to be one of the safest companies in the world and at the same time, one of the most profitable (the company’s annual net income was five times larger when O’Neill retired than what it had been before he took the lead). Before his arrival, nearly every Alcoa plant had at least one accident per week. When he began prioritizing workplace safety, the company’s workplace injury rate fell to one-twentieth the U.S. average.
What is so fascinating about this story, though, is how he did it. O’Neill recognized from the outset that he wouldn’t be able to motivate workers by talking about company profits or shareholder value. He chose something that workers intrinsically cared about, and something that would signal to them that he genuinely cared. When employees realized that he was committed to keeping them safe, there was a sort of reciprocity that developed, which affected more than just the accident rate.
New processes were developed around workplace safety, which included a very quick 24-hour turn-around time for workplace injury reporting to reach O’Neill himself. This required new communication systems that broke down previously entrenched hierarchies, and those who embraced the system were promoted. When injuries or fatalities occurred, the cause was meticulously examined, and new habits developed to prevent it from happening again. For example, after one employee fatality in which an employee had jumped a guardrail to fix a machine, all guardrails were painted bright yellow and training procedures were modified to ensure that employees obtained supervisor permission before entering certain areas of a plant. As safety patterns shifted at Alcoa, so did other aspects. For example, policies that managers had previously resisted—such as allowing workers to shut down a production line when the pace became overwhelming—were now embraced, because there was an acknowledgement that that was the best way to prevent injuries. As new routines developed, costs decreased, quality increased, and productivity went through the roof.
It is not so much that safety invariably causes productivity and profit to skyrocket, but rather that in this case, at least, safety habits and the systems required to implement them promoted a chain reaction in other areas that produced an overall cultural shift in the company.
**Trigger warning** The links that I provide below include stories of human injury and fatality, so please consider that before proceeding.
