This review first ran in the Aug.13th edition of The Hamilton Spectator.
The Power of Habit: Why We Do What We Do in Business, in Life and Business
Looking to change your corporate culture? Follow Paul O’Neill’s lead and set a goal that’s all or nothing.
O’Neill was appointed CEO of Alcoa in 1987. In his first meeting with Wall Street investors and analysts, O’Neill didn’t talk about higher profits, lower costs and maximized shareholder value. Instead, he told the confused crowd that he planned to make the aluminum manufacturer the safest company in America. “I intend to go for zero injuries,” said O’Neill who then pointed out the safety exits in the hotel ballroom and what to do in case of an emergency.
One investor recalls running to a lobby pay phone, calling his 20 largest clients and telling them to immediately dump all of their stock in Alcoa. “It was literally the worst piece of advice I gave in my entire career,” the investor tells author and New York Times investigative reporter Charles Duhigg.
The Wall Street financiers were baffled but O’Neill had done his homework. “I knew I had to transform Alcoa. But 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.”
O’Neill also knew that a journey to zero accidents was a keystone habit that all workers, the union and management would support.
“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 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 the indicator that we’re making progress in changing our habits across the entire institution.”
To better protect workers, the company needed to know why injuries were happening. And to know that, managers and workers had to study how manufacturing processes were going wrong. Fixing those processes would lead to safer, more efficient operations and higher quality.
O’Neill gave workers his home phone number and told them to call if their managers weren’t following up on safety issues. “Workers started calling, but they didn’t want to talk about accidents. They wanted to talk about all these other great ideas.” Managers who tried to cover up accidents were fired and those who embraced the journey to zero were rewarded and promoted.
Alcoa was one of the first companies to use email. The company built an electronic network so its worldwide operations could share real-time safety data. O’Neill logged on every morning and sent messages. Managers then started to share best practices and ask for help in solving issues beyond worker safety.
Within a year of O’Neill’s meet and greet with panicked investors, Alcoa’s profits hit a record high. By the time he retired in 2000, the company’s annual net income was five times larger than before he arrived. Market capitalization had risen by $27 billion. Some of Alcoa’s factories would go years without a single employee losing a workday due to an accident. The company’s overall worker injury rate fell to one-twentieth the U.S. average.
Transforming organizations by honing in on a keystone habit is one of many stories Duhigg tells to drive home the big idea of his book. Any personal, organizational or societal habit can be changed if we understand how they work. “Transforming a habit isn’t necessarily easy or quick. It isn’t always simple. But it is possible. And now we understand how.”
If you’re a fan of Freakonomics and the work of Malcolm Gladwell, then this book’s for you. Along with the Ballad of Paul O’Neill, you’ll learn how a hospital repaired toxic nurse-physician relations, how Target studies buying habits to identify and then market to pregnant women and new parents (the holy grail of retail), how football coach Tony Dungy turned around the sad sack Tampa Bay Buccaneers and led the Indianapolis Colts to the Superbowl, and why stressed Starbucks baristas don’t dump low-fat iced caramel macchiatos on the heads of obnoxious and rude customers.