Make Effective Organizational Transformation: Alcoa Case Study

Learn to create sustainable organizational transformation from Alcoa by looking inward for best practices it already had

Alcoa’s transformation to the company it is today began in 1997 when it strategized to put in place the Toyota ion System across its entire global estate, a total of 250 locations. Despite significant progress over the next few years, the Primary Metals Division was lagging. In 2002, Vince Adomo, then Vice President of the division, formed a team to investigate and form a new approach. This team included executives and external change management consultants.

One of these consultants told Adomo that Alcoa’s efforts were far too narrow in focus. That it was this focus which was holding Alcoa back from reaping the benefits of the Toyota ion System. Alcoa was placing too much of its efforts on its maintenance division. This meant ignoring the impact that improvements in operational equipment reliability would make.

Looking wider, engaging deeper

When Adomo investigated further, he found the consultant’s concerns were spot-on. It turned out the teams managing the change initiatives at each plant were top heavy with maintenance and engineering managers, with little representation from operations. On top of this, the company was suffering from a high turnover of its managers. This was hampering a focus on long-term reliability. The need for continuous improvement of leaders was adding to costs.

Using these findings, Adomo reshaped the change management teams. These now included plant managers, engineers, and operational leaders. He charged the teams with re-energising the change program to drive efforts to increase reliability. This new approach cascaded responsibilities down through the organization. Everyone became responsible for the new focus on reliability and giving greater prominence to safety issues, too.

Reinforcing the business case for change

Confirming the new strategy, Adomo investigated company data. This revealed wide disparities between the best performing and worst performing plants across Alcoa’s network. He wanted to see financial rewards as well as increased standards of safety. So insisted, that any return on investment should not come from the easy option of deferring maintenance. Rather, be sustainable improvements in productivity made from improvements in reliability. There would, of course, be savings from lower levels of maintenance and repair work, but this would come from improvements upstream.

From its examination of data and best practices elsewhere within the company, the group expected savings on its repair and maintenance budget of between 10% and 20% over three years. Not only this, but they estimated that every dollar of savings would lead to approximately $1.50 in gain on equipment effectiveness.

Creating a new change management strategy

Having created these new financial targets, the group’s new change management team realized it needed to concentrate efforts on employee engagement and coaching. These efforts again cascaded down through the organization, with the process following a natural progression:

  • Principles of new practices, with management support and sponsorship.
  • Cultural change, creating objectives and goals and concentrating on organizational behaviors.
  • Process re-development, with emphasis on equipment process design, procurement, and materials management.
  • Optimization, creating a leaner and more efficient organizational structure eliminating losses, and reinforcement training.
  • Sustainability, controlling costs, auditing efforts, management reporting and reliability engineering.

Managing change effectively

Central to the business transformation was the need to manage the change and do it well.

With a strategy for change in place, which included metrics to keep them on track, Alcoa engaged senior executive and plant management commitment through Town Hall meetings. They created mission statements, governing principles, and communication plans, empowered focus teams to implement.

These focus teams became an integral part of the change management effort. They met weekly to discuss improvements made to date. And, critically, identify a single job from the following week’s schedule to examine in detail. These job examinations led to identifying both successes and failures and adjusted their plans accordingly.

Smaller sub-groups formed to help with this process, removing strain from the bigger picture, more strategic focus groups and creating a greater feeling of ownership on the shop floor.

Reinforcing change for sustainability

This transformation was not a one-off quick fix. The strategy envisioned several years of work, and to this day Alcoa’s change management efforts continue. Top of its agenda remains reliability and safety. Communication methods include team meetings, one-on-one coaching, and various incentive schemes.

The occurrence of major component failures has been virtually eradicated, and when such failures do occur there is a robust cause analysis program in place to ensure they don’t happen again. Maintenance costs are down by more than 35% and reliability is up. Plants once threatened with closure remain open, operational, and profitable.

Six steps to sustainable improvement

Examining Alcoa’s change management efforts, we can break down its change management process into six steps:

  1. Look wider at all areas of impact
  2. Engage all stakeholders
  3. Create measurable targets for the new business case
  4. Redefine strategy
  5. Put in place coaching, training, engagement, and reinforcement communications
  6. Sustain change to sustain improvement

Following these steps, Alcoa has become the world’s largest aluminum manufacturer, with revenues approaching $25 billion (from the $4.2 billion sales it achieved in 1997).

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