Paul H. O’Neill Sr. on the "The Irreducible Components of Leadership" [Podcast]

Listen:

Episode Synopsis:

Welcome to the first episode of Habitual Excellence, presented by Value Capture.

Today, we honor the memory (and the words and actions) of Paul O’Neill, Sr., the founder of our firm, Value Capture. Mr. O’Neill passed away April 18, 2020 at the age of 84.

This episode shares the full audio from a 2009 speech that Mr. O’Neill delivered titled “The Irreducible Components of Leadership Needed to Achieve Continuous Learning and Continuous Improvement.” He talks about the fundamental components of leadership that are necessary for an organization to achieve greatness. The speech is also available on YouTube.

The speech was delivered to healthcare CEOs at an event sponsored by the Tennessee Hospital Association and BlueCross Blue Shield of Tennessee. In the speech, Mr. O’Neill shares what he learned during his career, which included 13 years as CEO of Alcoa, and serving for two years as the Secretary of the Treasury for President George W. Bush. He later co-founded the Pittsburgh Regional Healthcare Initiative and was a tireless advocate for habitual excellence in healthcare through Value Capture and other organizations.

I think you’ll find his words, and the calls to action for CEOs (and other leaders) to be timeless and compelling to this day, and beyond.

Scroll down to see how to subscribe and to read a transcript.

Click to visit the main Habitual Excellence podcast page.

Subscribe:

To make sure you don't miss an episode, be sure to subscribe today!

Automated Transcript:

Mark Graban (2s):
Welcome to Habitual Excellence presented by Value Capture. This podcast, and our firm, is all about helping you and your organization achieve Habitual Excellence via one unifying focus, one value based structure, and one performance system. In other words, it's about helping you capture dramatically more value through achieving perfect care and perfect safety for patients and staff. To learn more about Value Capture and our services, visit www.valuecapturellc.com. Welcome to the first episode of Habitual Excellence presented by Value Capture. Today, we honor the memory and the words and the actions of Paul O'Neill Sr., one of the the founders of our firm, Value Capture.

Mark Graban (50s):
Mr O'Neill passed away April 18 2020 at the age of 84. This episode shares the full audio from a 2009 speech that Mr O'Neill delivered titled "The Irreducible Components of Leadership Needed to Achieve Continuous Learning and Continuous Improvement." He talks about the fundamental components of leadership that are necessary for an organization to achieve greatness or Habitual Excellence. The speech was delivered to health care CEOs at an event sponsored by the Tennessee Hospital Association and BlueCross Blue Shield of Tennessee. In the speech Mr O'Neill shares what he learned during his career, which included 13 years as C.E.O. Of Alcoa and serving for two years as the Secretary of the Treasury for President George W.

Mark Graban (1m 36s):
Bush. He later co founded the Pittsburgh Regional Healthcare Initiative and was a tireless advocate for habitual excellence in healthcare through Value Capture and other organizations. I think you'll find his words and the calls to action for CEOs and other leaders in this talk to be timeless and compelling to this day and beyond.

Paul H. O'Neill, Sr. (1m 57s):
I want to talk to you about Leadership concepts this morning because that I believe this. I've now spent an awful lot of time, uh, working at a variety of ways in health and medical care. And I, I choose to talk about the leadership component because I believe this: "With Leadership anything as possible and without it, nothing is possible." So I want to define for you if I can, what it is, I mean by leadership. What is it that we should expect a leader to do? Well, first of all, I think it's necessary for a real leader to articulate what I call unarguable goals and aspirations for the institution that they lead and that does mean that I think they should invent them themselves in a dark closet, in the middle of the night.

Paul H. O'Neill, Sr. (2m 58s):
But I believe it's a really important critical role for a true leader to articulate non arguable goals. So I don't want to tell you to some non arguable goals. I'm going to start with my favorite thing in a really great organization. The people in it are never injured at work. <inaudible> Now when you a, when you head off in that direction, one of the things you will find, I found when I first went to Alcoa and I sat on the first day I was, there are people who work for Alcoa should never be hurt at work.

Paul H. O'Neill, Sr. (3m 38s):
They were a whole lot of people in Alcoa who didn't stay to my face but were saying in the hallway or are behind me. He doesn't know anything about making aluminum. He doesn't know what it's like to be in a smelter in Alcoa, Tennessee in the summertime where it's 130 degrees and that you met at these almost a hundred percent. And people get heat prostration and there's nothing you can do about it. He doesn't know or understand or appreciate any of that. And so we're pretty sure after he learned something about the business and we have our first downturn in metal prices, he'll shut up about safety because we're already in the top one third of all organizations in the United States in terms of our safety performance.

Paul H. O'Neill, Sr. (4m 29s):
Uh, so I'm, I'm here to tell you a leader who articulates unarguable goals is likely to get some arrows in the back, but it doesn't mean you should stop. It really should renew your commitment to be out there in front articulate and go. Let me think of it into health medical care and say to you, I believe the same kind of goal is the right goal for a hospital acquired and I it. Let me be careful to say it's very difficult to actually get to a zero injuries.

Paul H. O'Neill, Sr. (5m 13s):
To a work force or to zero nosocomial infections. But I think it's pretty hard for anyone to sustain an argument that says our goal should be some positive number. Because I, and I did this, you know, when I, when I first came to Knoxville and a, I said the people, uh, you know, I've only been here three weeks, but I hope the Alcoa tom-tom network works as well as most informal communication systems. Do and you already know that I've said that Alcoa should be a place around the world, not just in the United States, around the world in 43 countries and 350 plants, that we should be a place where people are never hurt at work.

Paul H. O'Neill, Sr. (6m 1s):
And it can only happen if you will, per to take personal accountability and responsibility for this, for yourself and for your associates, for us to get there. And if some of you, as I've been told by the supervisors believe that we should not set a zero goal because it's unlikely we can achieve it, I'd like for you to raise your hand if you want to volunteer to be hurt. So we can reach the goal. There were no volunteers. And I guarantee you, if you ask patients, would it be okay if we gave you an infection because we were not meeting our goal of this month, they're would be no volunteers. Alright?

Paul H. O'Neill, Sr. (6m 41s):
So a leader needs to articulate, non arguable, goals. And again, it doesn't mean that we know exactly how we're going to get there, but at least we've got every human factor in our organization aligned up and trying to achieve the targeted goal. This can't be done. This cannot be at a delegated function. You cannot have a person who is the vice president for goals. The leader needs to articulate the goals or other people do not have the power for the position to do that.

Paul H. O'Neill, Sr. (7m 21s):
Now, uh, after the goals have been articulated, clearly you noticed I didn't start by saying, you know, we're going to make a hell of a lot of money. And let me just say parenthetically that begin, because I believe in a truly great organization, finance is not an objective. It's a consequence. And it's great if at the consequences of being more excellent at what you do than anyone else that does what you do. And in my experience, the finance follows Excellence. So having a goal for economic, for financial success is to me, not, not a good place to start.

Paul H. O'Neill, Sr. (8m 9s):
It doesn't mean you don't have to earn the cost of capital or whatever your costs are, any of that. But it should not be an objective of the organization. It should be a consequence of excellence. So how do you move from this goal to action as an organization? Okay. The, first of all, I think it's a incredibly important to reach every person in the organization. And again, I'm talking with the theoretical limit of, in my experience, they're always, no matter how hard you work at it, there are a three or 4% of the human factors in the organization that never get it and can't get it.

Paul H. O'Neill, Sr. (8m 51s):
You need to do something about that. But I find most respond to a positive idea of leadership and organizational aspiration. Not many places really respond very well to make it as a motivation. Uh, and so in an organization I believe that has the potential for greatness, doesn't guarantee it, but has the potential for greatness. The people in the organization can say every day without any reservation or a hesitation. Uh, yes. The three questions here, the three questions.

Paul H. O'Neill, Sr. (9m 35s):
Uh, I'm treated every day with dignity and respect by everyone I encounter without respect to my gender or my nationality or my race or my educational attainment or my rank or any other discriminating qualifier. I think about that for a minute. So it means when you go into the lobby of your enterprise every morning, the person behind the desk treat every person with the same happy face and welcoming greeting, not related to whether you're a surgeon and that brings in 13% of the business or the person who cleans the room in a truly great organization, there is a seamless sense of everyone here is accorded dignity and respect every day.

Paul H. O'Neill, Sr. (10m 32s):
And I have a corollary for you, which I practice at Alcoa. If you're not important, you shouldn't be here.

Paul H O'Neill, Sr. (10m 39s):
Okay?

Paul H. O'Neill, Sr. (10m 42s):
That raises a really difficult challenging proposition if you think about it, because of an awful lot of organizations, when times are tough, people are laid off, right? Not in a great organization because at any particular time the people that are there are necessary or they wouldn't be there. That creates a real challenge for leadership to figure out how to, how to navigate ups and downs and economic cycles. And there is a way to do it by being clear in your own mind than in your own institution about the difference between a baseline of activity and fluctuating activities so that you can negotiate with people who are going to be on the bubble, if you will, that they understand that they're on the bubble and they are there as casual to take care of fluctuations.

Paul H. O'Neill, Sr. (11m 46s):
But for people that are part of the baseline, there needs to be an honored commitment that you are really important. You wouldn't be here and we need you all the time. So the first proposition is, I can say every day I'm treated with dignity and respect, full stop. A second proposition is this. I'm given the things that I need. Training, education, tools, encouragement, so that I can make a contribution. That's an important out that gives meaning to my life.

Paul H. O'Neill, Sr. (12m 29s):
Think about it. You know, if your work doesn't give meaning to your light, it's what you spend eight or 10 or 12 hours a day doing, then where are you going to get meaning in your life on the golf course are going out to dinner. You know? So I believe it's an obligation of leadership that create a condition so people can say, I have all of the things I need so I can make contribution that gives meaning to my life. Not a lot of places where people can say, this place gives meaning to my life. And the third proposition is pretty simple. It says every day I can say someone I care about and respect noticed I did it.

Paul H. O'Neill, Sr. (13m 17s):
In a word, it's recognition, regular, meaningful, sincere recognition. Now if you find a place or you can create a place, I would say this is the job of leaders. Again, this cannot be delegated to human resources. This is for a leader of an institution to establish the conditions on an ongoing basis. So every person in the institution, every day can say, you asked for these three propositions, then you have a potential for real greatness.

Paul H. O'Neill, Sr. (13m 57s):
Now, after that, after the leader has a articulated the goals and created these cultural characteristics that are pro excellence a leader needs to take away excuses and, and my experience, the excuses are all the same across a public private nonprofit. When you make these suggestions to people, they say, well, you know, and understand, uh, you know, we really can't do this quality or a continuous learning, continuous improvement set of things because we're already working two hours past what we get paid for.

Paul H. O'Neill, Sr. (14m 40s):
We're too busy to take on something new. And, uh, people will say we're too busy and they will say, if we're going to do, we need more people, right? We need to hire some people who are experts in a continuous learning, continuous improvement and quality. And we need to set up a new department. And, and people will always say, we don't have enough money. You know, we need W, we need more money. We're already struggling, so we need more money. I believe it's the leader's responsibility. Take away all of the excuses. So I'm going to give you an example of, uh, taking away excuses.

Paul H. O'Neill, Sr. (15m 24s):
He was telling this to Houma last night. She said, you need to tell this story. So what I first came to a Tennessee to Knoxville, to Alcoa Tennessee and I spent the morning walking through the plant because I, I, I like to feel the things that I'm supposed to be a responsible for it. So I wanted to see what it was like to be there for half a day and see what it smelled like and how the people were dressed and whether they had, you know, half of a finger, whatever, as a consequence of being in his place. And so at noon they said, well, we're going to have lunch. And there were 75 people of lunch.

Paul H. O'Neill, Sr. (16m 3s):
Half of them were from the supervisory ranks and the other half were from the a union organized workforce. So they said that, what would you like to say something? I said yes I would. So I got up and I said, you know, I want to talk to you about safety and I presume you've all heard this, but here's what I want to say to you. I want to say to the supervisors, uh, I believe its the leader's role to take away excuses. So here's what I'm saying to you, we will never ever in Alcoa again budget for safety, never. We're not going to have a budget line for safety. As soon as we identify anything, as soon as anyone in the institution identifies anything that could cause an individual to be hurt, we're going to fix it, right?

Paul H. O'Neill, Sr. (16m 55s):
And we're going to fix it as fast as it's physically possible. And so I want to charge you in the supervisory ranks with acting on that idea. You need to actually do it. If something breaks down or do you think something could hurt somebody, fix it right now. We'll figure out how to pay for it later on. Just do it. And then I turned to the hourly workforce and I said to them, you heard my instruction to them. Here's what I want to do with you. I want to give you my home phone number so that if they don't do what I said, you can call me. Not many CEOs were giving their home phone number away, but I want to, I wanted the people to know that this was a real thing and so it was very interesting.

Paul H. O'Neill, Sr. (17m 44s):
In a few weeks, I've got a call late that afternoon from an operating guy from the floor and then in the Alcoa Tennessee he said, you know what, I'm calling up because you've told him you taught all of us. We should call you if the supervisors are not fixing things as well. We've had a conveyor set, a roller conveyor system down here that's been broken for three days or so and as a consequence, those of us who are in the workforce have to pick up the 900 pound in, gets a bunch of us and put them on a Dolly and take them from one processing step to the next and we're going to get hurt doing this.

Paul H. O'Neill, Sr. (18m 26s):
Are our facts are at risk at a minimum. And if we dropped one of these things on our foot would be permanently disabled. So I want to know what are you going to do about it? So I said, you know, let me make a few phone calls. So I call the supervisory people and they explain to them that they were not doing what I told them what their obligations are, the workforce. And you know, I had a couple of phone calls from the first six months I was at Alcoa. But fortunately at the Tom Tom network at Alcoa really worked well. And after I had to make a couple of interventions, I didn't have to make any more interventions, you know? And so part of, part of what I want to say to you is leadership is not about writings on the wall.

Paul H. O'Neill, Sr. (19m 12s):
It's about acting in a noticeable way on the principles that you established so that people begin to believe that they are real, that they are not just writing it on the wall. I would suggest to every organization that I know about that has an annual report says someplace early in the annual report. Our human resources, our our most important asset. Okay? So in most places there's no evidence. It's true. It's just a sentiment. So we all say it. Yeah. Our human restarts arm. Is your practice consistent with that?

Paul H. O'Neill, Sr. (19m 53s):
So it's part of the reason that I elected at the first day I went through Alcoa to articulate those goal of no one should ever be hurt at work because it's measurable, right? You can tell whether or not somebody couldn't come to work if they were hurt at work because they aren't there. Right? You can't, by the numbers, you can fudge the numbers about recordable instance incidents and first aid cases, but pretty hard to lie about. Didn't show up today. That's why I wanted a hard major that we can look at every day and we can appreciate whether we were making progress or not. So I want to tell you a little bit about how these numbers are done.

Paul H. O'Neill, Sr. (20m 35s):
And then in 1987 the average number of cases of American's in the workforce being hurt at work was five out of every 100 in 1987 had an incident at work that caused them to miss at least one day of work. Five out of a hundred Alcoa. His was 1.86 and if you want to know, Oh, what the number is Today go on the internet type Alcoa when you get the drop down menu, go on environment, health and safety, and it'll tell you 24 hours a day in 43 countries in 350 locations.

Paul H. O'Neill, Sr. (21m 17s):
But the injury of what? The law of the work they injury rate is on a running basis. Anytime you want to look at yesterday's, it was 0.116. Now why do I tell you that? Because the average lost Workday rate in American hospitals is 3.0 and if you're not good at math, that's 26 times worse than Alcoa. Okay. That's the unforgivable because? Because it's within the capacity of leaders to articulate a zero goal and then to accomplish, and I'm going to tell you a little bit about how do you accomplish it.

Paul H. O'Neill, Sr. (22m 2s):
A, because it's not good enough, purely new won't surely won't do it, but this is really relevant to the quest for excellence in health and medical care. But I want to stay for a moment with injuries to the workforce because the lessons about how to get close to zero in injury rates among the workforce are exactly precisely the same things that are required to achieve startling excellence in the delivery of health and medical care. Ah, so first of all, you have to establish a process that says every incident that happens to one of our employees is going to be recorded within 24 hours and it's going to be put into cyberspace along with the surrounding circumstances and where as possible to do it in 24 hours.

Paul H. O'Neill, Sr. (23m 6s):
The root cause analysis and an indication of a corrective action that's being taken so that this set of circumstances will never again produce this result. No, no. I want to tell you a special piece about this. I believe it's really important at our world to keep things personal. And so when I started this Alcoa and I said, I not only do I want to identify this case, I want to do it by name. My lawyer didn't like that because they said, you're going to create a for the tort bar to come in here and sue the hell out of us because we're now gonna put in cyberspace, for anybody to look at individuals by name of what happened to them.

Paul H. O'Neill, Sr. (23m 56s):
You know what lawyer can find a better way to pre produce cases that, and I said, you know, I don't think you're right and I'm going to take the personal responsibility if we do get sued because it's so important that we not let this be statistical. It needs to be about every person is important and they are important by name. They're not important as a statistic. So what are you do when you create that in a world that we live in now with an unbelievable conductivity, if you have an understanding, then everyone in the organization has signed on the wall.

Paul H. O'Neill, Sr. (24m 39s):
I'm responsible for myself for not being hurt and for my mates not to be hurt. When the message goes into cyberspace, you can look at it with an expectation within the next 24 hours, 349 other locations around the world, including in Guinea, in Russia and China, in, in the uh, and Brazil and Argentina, 43 countries in at all is that the people in those institutions will look at those cases and they will make whatever modifications are indicated. So we don't have to learn this 350 times and that's how you get close to zero by Continuous Learning and Continuous Improvement from everything gone wrong.

Paul H. O'Neill, Sr. (25m 36s):
It really, it really works an unbelievable way and I would suggest to you in health medical care, it would be great if we could get leaders to sign up or the idea that there is a measurable way of knowing whether or not the people in the organization are truly the most important resource by being able to tell what kind of an injury rate exists among the people who deliver the care. So that, I have to tell you, I'm really skeptical of an organization that doesn't know what its injury rate is, that they're really good at hand hygiene, you know, because if you're not really good at your workers' own safety, if, uh, there's some, at least for me, there is a doubt that you're really good at the other things that we know are directly related to perfect patient care.

Paul H. O'Neill, Sr. (26m 42s):
And again, I would suggest to the tools of learning and our approach and engagement of the population are exactly the same in every kind of institution. So the one I went to the Treasury, I tell you a little story about, um, uh, Larry Summers who was my predecessor as a secretary of the treasury under the Clinton administration. And so when we had our, um, first briefing session when he was going to tell me about what he had been doing towards the end of the session, I said the Larry, what's the lost workday of rate at the Treasury? And he said, I didn't know what you're talking about.

Paul H. O'Neill, Sr. (27m 23s):
And frankly was not a surprise to me. A, and took about three weeks to actually round up to data and, and it turned out that the injury rate at Treasury, you may think, how can anybody get hurt at the Treasury? Well, there are a 125,000 people there and it's a significant fraction of them working the mint and a, if you went into the Mint in 2001 to look at the workers, you'd find a lot of workers with a half a little finger because of stamping machine took the other end of their finger office kind of a badge of experience. The injury rate in the Treasury, it was unbelievable. 23 month we reduced the injury rate of the Treasury by 50% at 23 months.

Paul H. O'Neill, Sr. (28m 7s):
But I want to tell you another story that's related both to Alcoa and the Treasury to demonstrate another important principle to you. I believe that excellent at its best is Habitual and by Habitual I mean it's ingrained and inculcated all the individual's in the institution and so that it's almost automatic. So it means it applies to everyone. Again, I can't say enough about how important it is that if you're really going to be on a quality quest, it needs to be about everyone in the institution.

Paul H. O'Neill, Sr. (28m 52s):
The people in the quality department cannot produce quality in an organization. It doesn't mean they don't have an important responsibility, but they cannot do it in the same way that infection control committees cannot fix infections, right? They have an important role, but they cannot make it happen for the whole institution. And so you know, in this quest to make sure that everyone institution grasp these ideas. I called In the controller at Alcoa. This is about 1991 and I said to him, Ernie, I like to know right now we're closing our books in this worldwide enterprise in 11 days and reporting our results to wall street.

Paul H. O'Neill, Sr. (29m 38s):
And I'd like to know if we had a process with no repair work, no transpositions of numbers, no foul ups with with computer programs that don't integrate very well with each other. All of these 350 locations, if we had no repair work in all of the time that we spent was high value touch time. That means we're actually producing Value and every minute of every day, how long would of taken about three weeks. He came back to me and he said, I've figured out the answer to your question and here it is right now. We're closing the books in 11 days. If we did it perfectly, we could do it in three days.

Paul H. O'Neill, Sr. (30m 20s):
And I said, you know, are any, that's our new goal. And he said, no, no, that's not what I meant. Oh my God, we can't really do that. That just the answer to your question. I said, Hey Ernie, we're trying to be perfect at everything else when we do, including workplace safety and manufacturing. Don't have time to tell you those stories, but, and so the finance function needs to demonstrate to the rest of the organization what Excellence really looks like. And it took us a year to get there. Now here the leadership function really important. I have to say to them, I don't care how much it costs and make this perfect.

Paul H. O'Neill, Sr. (31m 1s):
I don't care because I'm so confident that the value is there. And so here's your permission. You can examine all of the things that were sucking up from around the world and decide whether the stuff that has evolved is really critical to a financial characterization of our organization and meeting our responsibilities to the securities and exchange commission. So you have freedom to redefine what it is we do. You have the resources to rewrite the computer programs so that they are friendly to human beings instead of only people who are nerds who delight in complexity.

Paul H. O'Neill, Sr. (31m 47s):
So you can make this so that it works are the people that you have to do the process of financial roll up and the, if you need some outside help go and get it. So leader needs to provide a running room for people to work towards the theoretical limit, add in a year. We've got to the point where we could close our books in three days full stop. And today if you look at the quarterly earning report process and your look at CNBC or any of the other financial channels, Alcoa is still and probably always will be the first major corporation to roll up the earnings and report them are good and bad because of the process works.

Paul H. O'Neill, Sr. (32m 32s):
Now I think about the implications of that and I want you to transfer it to the health and medical care and Alcoa at that time we have 1300 people in the finance function and by going from 11 days to three days, we freed up eight days a quarter for 13 of the most highly trained analytic people in the organization. Not that we could fire them, but so that they could use their brain power to help us better understand how to improve everything else we were doing. This is not about firing people. It's about creating the opportunity for applying resources in a way that produces ever greater value.

Paul H. O'Neill, Sr. (33m 17s):
So when I went to the Treasury, I said to them, uh, how long does it take us to close our books after the end of the fiscal year of September 30th? And he said, what? We usually get it done by March. And I said, I don't know why you even bother. Who the hell wants to know what the numbers were? Five minute, five months after the path. So I said to him, you know, I know an organization that's more complicated than the treasury. Where are they? Close the books in 30 days. And that should be our goal of the Treasury. We should be at least as good as Alcoa. And so they said, you know, again, they excused the routine. We don't have the money. We're already too busy. And then they hit me with a new one.

Paul H. O'Neill, Sr. (33m 59s):
Government laws and regulations won't permit it. A smart guy. So I said, I tell you what, if you can show me a rule or regulation or a law that prohibits us from doing this, I will go and get a change. You know, again, it was taking away the accused to give it to me. If we, if you tell me, are there barriers that need to be rolled away, I will roll over the barrier. There weren't any, you know, it was just an excuse. Nobody had really examined, how the hell can we do this? We will do it. And so in 13 months at the treasury, we, we figured out how to close the books in three days. If you want to see this story, it's on the Treasury website.

Paul H. O'Neill, Sr. (34m 40s):
You know, they're so proud of it. My name is in there, but it happened on my watch because I got my controller from Alcoa to come pro bono. We didn't pay him a dime to come pro bono to coach the people at the Treasury how to do this job. OK. And again, the reason I tell you this because I learned an awful lot of healthcare institutions that don't close their books in three days, but they could if the leadership decided this is the value and a way to demonstrate the organization that every part of our institution is on the same wavelength and we're all about excellence and we don't and we won't live in silos and we won't embrace excuses and we will be excellent at everything that we do and I would tell you more stories about how our medical care, but I've used that my time and I hope I have challenged you a little bit, maybe inspired you a little bit about the potential for what you as leaders in health Medicare can do because I will tell you just one more thing.

Paul H. O'Neill, Sr. (35m 49s):
I believe there is no other sector of our society and our economy that has the same potential for simultaneously improving outcomes from medical intervention and reducing the cost by a trillion dollars a year.

Mark Graban (36m 12s):
Thanks for listening to Habitual Excellence presented by Value Capture. We hope you all subscribe to the podcast and please also rate and review it in your favorite podcast directory, or to learn more about Value Capture and how we can help your organization on this journey to Habitual Excellence visit our website at www.valuecapturellc.com.