Vision,Values,Milestones: Paul O'Neill Starts Total Quality at Alcoa

For about an 18-month period, the author served as the chief outside consultant to both the Quality Task Force that designed Alcoa's quality initiative as well as to the senior management “Operating Committee” that directed the implementation. During much of the time he was joined in this work by his Columbia Business School colleague, Professor Michael Tushman. Kolesar's Peter research and teaching background is in engineering, operations management, and applied statistics. He entered the world of quality management through that avenue. Michael Tushman's work by contrast is concerned with organizational design and change, and the management of innovation.

For a detailed history of Alcoa up to this time, see Smith George David , From Monopoly to Competition: The Transformation of Alcoa. 1888–1986 (New York, NY: Cambridge University Press, 1988). The articles of Michael Schroeder and Thomas Stewart carry the story forward to the appointment of O'Neill as Chairman and CEO and his redirection of the company. Schroeder Michael , “The Quiet Coup at Alcoa,” Business Week, June 27, 1988, pp. 58–65; Stewart Thomas A. , “A New Way to Wake Up a Sleeping Giant,” Fortune, October 22, 1990, pp. 90–100.

The Operating Committee included the Chairman and CEO, the President, the Chief Financial Officer, the General Counsel, the Vice President of Human Resources, and four Business Group Vice Presidents. When we write about the meetings and activities of this group we include all the aforementioned as participants.

The content of Deming's 1950 Tokyo lectures may be found in Deming W. Edwards , Elementary Principles of the Statistical Control of Quality—A Series of Lectures (Tokyo: Nippon Kaguku Gijutsu Rommei, 1951). This is an edited version of lecture notes transcribed by Japanese participants. Proceeds from sales of this book were donated by Dr. Deming to the Japanese Union of Scientists and Engineers, the group which had sponsored his visit. The funds were used to establish the Deming Prize.

For an accurate description of the Deming red bead experiment and his interpretation see Walton Mary , The Deming Management Method (New York, NY: Dodd Mead & Co., 1986), Chapter 4; and Gabor Andrea , The Man Who Invented Quality (New York, NY: Times Books, 1990).

The particular framework used for the diagnosis was an organizational model of Nadler-Tushman. Nadler David Tushman Michael , “A Model for Organizational Diagnosis,” Organizational Dynamics (Autumn 1980). During the seminar we made the point that alternative diagnostic frameworks existed and that it was more important that one be used than which one. Our main purpose was to methodically expose all the elements of the enterprise that affected quality and that conversely would be affected by a move toward total quality management.

Some months earlier, Mr. Fetterolf had been on a benchmarking visit to Japan to review advanced manufacturing techniques. While he and the other participants learned and were inspired by the experience, nothing concrete had resulted from the Advanced Manufacturing Task Force. This failure was indeed well known to, and on the minds of, several Quality Task Force members.

The history of the Xerox effort is now reasonably well documented in the public literature. See, for example, the story as recounted by two of the key participants, Kearns David Nadler David , Prophets in the Dark: How Xerox Reinvented Itself and Beat Back the Japanese (New York, NY: Harper Business, 1992). Jacobsen Hillkirk describe in detail the challenge from Japan and some of the personalities involved. Jacobson Gary Hillkirk John , Xerox, American Samurai (New York, NY: Collier Books. 1986). On the Xerox quality effort, see Chapter 7 in Gabor , op. cit., which is, by the way, much more critical of the Xerox approach.

Kobayashi Yotaro , “Quality Control in Japan: The Case of Fuji-Xerox,” Japanese Economic Studies (Spring 1983), pp. 75–104.

Most of the quality gurus testify to the large proportion of problems that are “due to the system.” See, for example, the books of Deming and Juran. There has been no scientific documentation of this contention. The author is tempted to make his estimate far higher in some industries and far lower in others. In part the issue is whether processes are “in contol.” Deming W. Edwards , Out of the Crisis, MIT-CAES, Cambridge, 1986. Juran Joseph M. , Juran on Planning for Quality (New York, NY: The Free Press, 1988).

A sense of the public response to the Alcoa quality initiative and to O'Neill's Paul leadership can be gotten from Stewart, op. cit.; O'Boyle Thomas F. Pae Peter , “The Long View: O'Neill Recasts Alcoa With His Eyes Fixed On a Decade Ahead,” The Wall Street Journal, April 9, 1990, pp. A1 and A4. Over this period, Alcoa was repeatedly listed as first among the Metals Industry in Fortune magazines's annual “America's Most Admired Corporations” beauty contest. (About which a senior Alcoa manger observed, “That's real nice, but the industry sucks.”) Over the two-year period 1989 to 1991, Alcoa's common stock earnings were 28.5% as compared to −28.3% for Alcan and 12.2% for Reynolds.

Here, O'Neill Paul is predicting a dire future unless significant anticipatory action is taken. One is reminded of a 1939 address by Winston Churchill to the House of Commons castigating the British government for its tardy and ineffectual response to the threat of Nazi Germany. It was a much more crucial and historical issue that Churchill faced then, but his words ring true in this contemporary industrial context as well. He said, “When the situation was manageable it was neglected, and now that it is thoroughly out of hand, we apply too late the remedies which might then have effected a cure. There is nothing new in the story. It is as old as the Sibylline books. It falls into that long dismal catalogue of the fruitlessness of experience and the confirmed unteachability of mankind. Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusion of counsel until the emergency comes, until self-preservation strikes its jarring gong—these are the features which constitute the endless repetition of history.”

A Hall cell is the electrolytic device in which the smelting of aluminum is done. It is essentially a large carbon lined bathtub. An operating efficiency issue is how long such a pot can be run before it must be shut down and relined with carbon—this time is called “pot life.” Alcoa was founded by the cell's inventor, Charles Martin Hall.

For a development of this line of reasoning, see Imai Masaaki , Kaizen: The Key to Japan's Competitive Success (New York, NY: Random House, 1986).