Why Elite Organizations Design Their System of Leadership

Dawn of the Leadership System – Part 1

It was in October of 1987. Place, New York City. The keynote speaker was slim, silver-white hair, confident, and articulate. He had just been named CEO of an industrial giant that was troubled. Quality was suspect, profits not what they should be, labor unrest, and he was 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.

It is fitting that we pause to remember. He passed away just a few days ago 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 it was to work in the back office of an insurance company shuffling paper.

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.

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 system of leadership, every leader, manager, production lead, and coordinator had a singular transcendent purpose, safety of the workforce. When corporate meetings, operational or at the Board level, begins with the safety report, everyone goes on notice, safety is critical. When O’Neil gives 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 plant managers understand they will be fired if they do not report to O’Neil an accident resulting in a day of work off work, safety is recognized as critical.

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 always will include the employee experience. For Alcoa, it was the safety of the employee. Determining the purpose is likened to harnessing 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.

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