Safety First

Paul Henry O'Neill (born December 4, 1935) is both a well-known politician and businessman in the United States. He served as the Secretary of the Treasury under President George W. Bush until 2002. Before he joined the government, he was chairman and CEO of Pittsburgh-based industrial giant Aluminum Company of America — or Alcoa, as it was known — where he had a very memorable experience which people pass on as a valuable lesson for business leaders (Duhigg, 2012).

In October 1987, investors of Alcoa and financial analysts gathered in the ballroom of a Manhattan hotel to meet the new CEO of Alcoa. The new chief executive, Paul O’Neill, was to take the stage and address the crowd. Everyone wants to know about his new plans for the company, but when he opened his mouth, everyone was stunned. 

Instead of ideas to expand the profit margins, O’Neill said that his top priority was worker safety. Every year, many Alcoa workers were injured so badly that they miss a day of work. He intended to make Alcoa the safest company in America and to go for zero injuries.

The audience was confused. People did not hear the things that they expect to hear. They were unable to recognise anything which can directly increase the shareholders’ benefit. Eventually, someone raised his hand and asked about inventories in the aerospace division, and another asked about the company’s capital ratios.

“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.” Profits, he said, didn’t matter as much as safety.

The audience almost stampeded out the doors when the presentation ended. One investor immediately called his largest clients, and said, “The board put a crazy hippie in charge, and he’s going to kill the company!” He ordered them to sell their holdings as soon as possible before everyone else did the same. Later, he confessed, “It was the worst piece of advice I gave in my entire career.”

Shortly after Paul O'Neill became CEO, he visited the company’s smelter in East Tennessee. After meeting with the people there, he turned to the union leaders and said, “Here’s my phone number at home, and if they don’t do what I said, I want you to call me.”

Some weeks later, O’Neill got a late night call from a production worker at the plant. The caller said, “I just wanted you to know that for the past two or three days, we've had a broken conveyer belt.” The broken belt meant workers had to hoist burning heavy ingots from one spot to another manually, which was surely not a safe practice.

O’Neill called the plant manager, told him to report to the smelter, get the problem fixed and called him back after they finish the repairment. He got the call-back at five that morning. Believing that there was an active tom-tom network at Alcoa, O’Neill didn't had to do that at every plant because he thought the managers soon knew he meant it that safety was his goal.

Within a year of O’Neill’s inauguration, Alcoa’s profits soon hit a record high. By the time he retired to become Treasury Secretary, the company’s annual net income was five times larger than before he arrived. Someone who invested a million dollars in Alcoa on the day O’Neill took charge would have earned another million dollars in dividends, and the value of their shares would be five times bigger when he left. O’Neill accomplished all this by making Alcoa one of the safest workplaces in the world, showing that preventing losses is one of the best ways to gain.

REFERENCE: Duhigg, C (2012). The Power of Habit: Why we do what we do in life and business. New York, NY: Random House.