QUALITY in PRACTICE: Leadership Changes at Alcoa41 Alcoa, ranked as the 79th largest firm in the 2005 Fortune 500, employs approximately 129,000 people worldwide and had 2004 annual sales of $23.96 billion. Alcoa has been known for progressive, innovative management. It treats its employees well, tries to avoid layoffs and plant closures unless forced to make changes as a result of continued negative results, and has unions at only about 15 of its 47 locations. Nevertheless, at Alcoa's industrial magnesium plant in Addy, Washington, a crisis of epic proportions rocked the plant and rattled the company, leading to some key leadership changes that ultimately resulted in dramatic improvements in safety, productivity, and profits. At the time of this case (in the late 1980s) the plant was facing two severe problems: an unacceptable rate of serious injuries that averaged 12.8 per year, and five years of unprofitable operations. No clear, easily-implemented solutions were apparent for the first problem, but corporate management had suggested that layoffs of 100 or more employees were all but inevitable in order to stem the tide of red ink. Operating statistics bore out the depth and breadth of the problem. Prices of magnesium had dropped, and units selling for $1.45 on the open market cost $1.48 to make at Alcoa's plant. Quality control was below what was needed to counteract market forces, with magnesium recovery at only 72 percent of the raw material being processed. The apparent causes of plant problems consisted of a complex mix of lack of accountability, poor quality control, inadequate leadership, and low morale, especially among hourly employees. Corporate management stressed safety above all, and profitability second. The death of an employee, who was related to seven other employees, and the unacceptable financial losses led senior corporate management to decide that a change in plant management was essential. Don Simonic, a former college football coach, with Alcoa experience, was tapped for the job of plant manager. His turnaround team members included the then-personnel manager, Tom McCombs, and outside consultants Robert and Patricia Crosby. If the new leadership team could not turn the plant around, plant closure or sell-off were the only remaining options. Since its construction, the plant had been designed with an open-systems, team-based culture, adapted from socio-technical systems theory. It was structured similar to the way that Procter and Gamble had set up its soap plants, and was considered a leading-edge organizational design. The process for producing the industrial magnesium was highly advanced and technical, and the innovative work team structure seemed to fit the technical systems characteristics. The plant attracted visitors from inside and outside the company who wanted to benchmark the operation and talk to team members. The organizational structure included: · • Autonomous, self-directed teams with no immedi ...