What Hospitals Can Learn from Alcoa

July 10, 2014
William Balfour
Leslie Gold, Director Revenue Optimization Solutions

Leslie Gold, Director Revenue Optimization Solutions

When Paul O’Neill took over Alcoa in 1987, market share had been slipping, profits were down, and the stock price was falling.  When he was introduced to the investment community, he was expected to deliver the typical new CEO speech about how he would turn the company around with a focus on increasing profits and reducing costs. Instead, Paul O’Neill announced that his goal was to make Alcoa the safest company in America.

“If you want to understand how Alcoa is doing,” O’Neill explained, “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.” Shocked at what they were hearing, many of the investors left the board room that day and advised their clients to sell.

Ignoring the skepticism, O’Neill began by requiring that any time there was an injury, it be reported all the way to the top immediately, and that new processes be put in place to prevent a recurrence. This requirement forced everyone to speak up and to listen, regardless of where they were in the hierarchy. Good ideas could quickly and easily filter up to the top and be implemented. Workers at all levels were given the authority to make changes that would create a safer workplace. And finally, workplace safety was continuously monitored, with results shared throughout the organization.

As the institutional habits changed, it impacted how Alcoa conducted business. As the organization worked together, not only did the number of accidents fall, but the customer base grew, costs were reduced and profits soared.

One of the investors who had doubted the power of changing institutional habits and advised his clients to sell later noted, “It was literally the worst piece of advice I gave in my entire career.”

As hospital leaders, we all want to cut costs, raise our patient satisfaction scores, improve quality, reduce re-admissions, grow volume, ensure we have enough revenue to continue serving our community, etc. But what is your organization’s top priority?  How will you measure it? What institutional habits need to change at your hospital? How can you empower others to achieve these goals? How can you ensure everyone’s habits are aligned around the hospital’s priorities?

A great example of what can happen when hospital executives use analytics to empower frontline decision makers is Morrow County Hospital in Ohio. Putting the right data in the hands of department managers has helped create a $1.5 million savings.

How can the successes at Alcoa be applied in your hospital to help you navigate the challenges ahead together?  What habits of excellence will you create?

 

 

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