Leadership as an Organizational System?

How Paul O’Neil’s Legendary Leadership was Really a System

The leadership of Paul O’Neil, CEO of Alcoa Aluminum, is legendary. However, during his tenure as CEO, Alcoa’s growth cannot be attributed to his personality or charisma. His primary contribution was establishing leadership as an organizational system.

His introduction in New York in October of 1987 was not without controversy. O’Neil was slim, silver-white hair, confident, and articulate. He had just been named CEO of Alcoa, an industrial giant that was troubled. Quality was suspect, profits not what they should be, labor unrest, and an outsider, a government outsider. His first words were these, “I want to talk to you about worker safety. Every year, numerous Alcoa workers are injured so badly that they miss a day of work”. Paul O’Neil hardly made a confidence-building speech to the financial community at his introduction as the new CEO of Alcoa Aluminum.

Results

Paul O’Neil recently passed away at the age of 84. By anyone’s measure, Paul O’Neil ranks as one of the great corporate leaders in a generation. Over the 13 years of Paul’s guidance, Alcoa’s market valuation surged from $3 billion to $27.5 billion, and net income rose from $200 million to $1.5 billion, while also making Alcoa one of the safest places in America to work. When he retired, it was safer to work in an Alcoa foundry with 2000-degree(f) liquid aluminum flowing around than to work in the back office of an insurance company shuffling paper.

How Did He Do It? Personal Charisma, Inspiration?

The question is, how did he do it? Was it his charisma, charm, ability to see into the future, or strategic brilliance? Or was it something more fundamental? More structural? As I have studied his leadership, it strikes me that he designed a structured system of leadership, then trained, modeled, coach, and required every leader and manager to lead according to its requirements.

The System of Leadership

Donella Meadows, one of the giants in Systems Theory, says, “The least obvious part of the system, its function or purpose, is often the most crucial determinant of the system’s behavior.” By making workforce safety, the purpose of his leadership system, every leader, manager, production lead, and coordinator had a singular, transcendent purpose: the workforce’s safety. For example, when corporate meetings, operational or at the Board level, begin with the safety report, everyone notices that safety is critical. Similarly, when O’Neil gave out his personal phone number and tells the workforce to call him if their supervisor is not listening about their ideas to improve safety, everyone knows, safety is essential. When O’Neil fired one of his most capable plant managers for not reporting a minor accident, he established a president. Safety is the priority.

Purpose of Safety = Primary Output of Leadership

The result? Safety became the lens through which every process and procedure could be evaluated and improved. Instead of costing Alcoa money, Alcoa enjoyed the best economic returns in its history.
The first step in designing a leadership system is to determine its purpose, which will always include the employee experience. For Alcoa, the employee experience included personal safety. When an organization determines the purpose of its leadership system, it will harness the iceberg’s unseen power, the part that is below the waterline. It is this mass that determines the course and speed as it drifts the ocean currents.

So, the first step in designing a system of organizational leadership, determine what it is to produce. As Meadows describes, every system has three parts. The most important of which is the purpose.