Sometimes the best way to affect large-scale change is to focus on changing one important habit, what Charles Duhigg calls a keystone habit. Here is the story of Alcoa’s transformation.
One October day in 1987, the new CEO of the Aluminum Company of America, or Alcoa, took to the stage of a ballroom in a New York hotel. Paul O’Neill had been a surprise choice for head of one of the world’s biggest aluminium product manufacturers. The former US Government bureaucrat was virtually unknown in the ranks of Wall Street, and the company’s many investors were nervous about his ability to stem the losses Alcoa had recently accumulated by launching unprofitable new lines. To address this unease, Alcoa had decided to gather together prominent investors and stock analysts and formerly introduce its new leader to them.
Standing on the ballroom stage, the 51-year-old O’Neill looked every bit the chief executive – trim and taut, with a dignified head of white hair and a warm, confident manner. The audience relaxed. You could almost hear the collective sigh of relief that said, ‘Everything is going to be OK’. Then O’Neill opened his mouth.
‘I want to talk to you about worker safety’, he said. ‘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.’
The audience’s relief turned into confusion. This was not what they were accustomed to at such events. Where was the promise to raise profits and lower costs? Where was the passionate criticism of corporate regulations and taxes? Where were all the comforting buzzwords like ‘synergy’, ‘alignment’, ‘rightsizing’ and ‘co-opetition’? What was all this talk of worker safety? Wasn’t that something that someone who was in favour of regulation might say?
O’Neill continued, seemingly oblivious to his listeners’ reactions: ‘Before I go any further, I want to point out the safety exits in this room. There’s a couple of doors in the back, and in the unlikely event of a fire or other emergency, you should calmly walk out, go down the stairs to the lobby, and leave the building’.
The comments were greeted with a deafening silence. The confusion had become outright bewilderment. One investor, remembering O’Neill’s stint in Washington in the 1960s, thought, ‘Guy must have done a lot of drugs’. Then, tentatively, hands started going up. In a desperate attempt to find familiar ground, people started asking about capital ratios and inventories and the like.
‘I’m not certain you heard me’, O’Neill said. ‘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.’
After the presentation, many analysts called their clients and advised them to sell all their stock in Alcoa – immediately. One of them told a client, ‘The board put a crazy hippie in charge and he’s going to kill the company’. It would turn out to be the worst financial advice those analysts ever gave.
A year later, Alcoa’s profits would hit a record high. Thirteen years later, on O’Neill’s retirement, the firm’s annual net income would be five times greater than it had been when the CEO was hired. His company would also be one of the safest in the world.
‘I knew I had to transform Alcoa’, O’Neill would later explain. ‘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 concentrated on changing one influential, or keystone, habit throughout his organisation – safe practice – and this had a domino effect, causing many other habits to change too. For the better.
Sourced from Charles Duhigg (2012),
The Power of Habit: Why We Do What We Do in Life and Business
, Random House, New York.
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 Behaviour Change at a Time
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
But what he also did rather skilfully was to encourage group behaviour. He encouraged Alcoa workers to to consider the safety of the group rather than themselves. He rallied the workforce to work together for a common goal.
Humans see themselves in terms of other people and groups. Evolution has taught us that it is beneficial to live in tribes, where we can share out the work of daily survival.
O'Neill harnessed the strong human need for group identity to build a thriving organisation. The trick in using group identity when wanting staff to change behaviour or embrace a new goal is to word it so they make a decision based on what’s best for the group. Activating peer pressure is an effective way to get a group to persuade others to act in a certain way
And you'll notice that O'Neill never used the word "I" in his speech. Saving lives wasn't about him. It was about the group - it was about the Alcoa workforce. He also cleverly used a shareholder meeting, to let his staff know, that he wasn't there to increase shareholder returns. He was there to improve their quality of life, to ensure that they would arrive home safely at the end of the day. By launching his first speech to outsiders, he powerfully communicated to staff, just how committed he was to improving their workplace. That he could be trusted. That he was on their side.
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 companywide 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 flow of communication. Workers told their floor managers who told the vice president about injuries, but also to raise warnings when they saw a potential problem. A suggestion box was filled with ideas for solutions, so that if the vice president requested a plan, a collection of suggestions was submitted.
Spare No Expense on Safety
O’Neill believed that the best way to keep employees staff was to discover why injuries were occurring in the first place. This was done by studying what was going wrong in the manufacturing process. Employees received training about quality control and how to work more efficiently. By ensuring that employees developed the habit to do tasks right in the first place, their work became safer.
Starting with his inaugural speech, Paul O'Neill transformed Alcoa into an efficient, open communication workplace that was the safest aluminium company on earth. By transforming workplace safety into a daily habit, O'Neill improved efficiency and sales. By taking care of the "why", he took care of the "how" and "what".
