Discussion case: Alcoas Core Values in Practice
Alcoa began under the name of the Pittsburgh Reduction Company in 1888, changing its name to the Aluminum Company of America (Alcoa) in 1907. The company was originally founded on a $20,000 investment to capitalize on Charles Martin Hall’s invention to smelt bauxite ore into the metal known as aluminum. Within a few years, Alcoa had developed into a model of large-scale vertical integration with control over all the inputs to aluminum production. Now, over 125 years later, Alcoa is a global leader in lightweight metals technology, engineering, and manufacturing, with over 60,000 employees and operations in 30 countries.
Since its inception, Alcoa has had a very strong values-based culture. Employees learn early in their career that every decision they make and everything they do must be aligned with the company’s values: Integrity; Environment, Health and Safety; Innovation; Respect; and Excellence.
Since the 1990s Alcoa’s leadership has communicated their commitment to the importance of health and safety—one of the company’s core values. Alcoa has a stand-alone environmental health and safety (EHS) organization and a dedicated global ethics and compliance (E&C) organization. The Alcoa E&C program incorporates all the elements specified in the U.S. Federal Sentencing Guidelines and Sarbanes-Oxley Act. The chief ethics and compliance officer makes regular reports to Alcoa’s Audit Committee and to the company’s Compliance Advisory Council, which includes the CEO, CFO, and chief legal officer. E&C is responsible for global training, the code of conduct, the global anticorruption and trade compliance programs, internal investigations, and the company’s global helpline reporting system. The importance of safety, integrity, and “doing the right thing” is regularly reinforced by management and through E&C communications.
In addition to continuous safety training and education programs, the norm at Alcoa is to start all business meetings with a safety message to identify exits, the evacuation plans in the event of an emergency, and other safety procedures. All locations are required to meet the same overall goal: zero work-related injuries and illnesses. Alcoa’s management team has made the commitment that no employee should be forced to work in an environment where their safety and the safety of other employees might be jeopardized. Simply stated, no employee should leave work in a worse condition than when they arrived. Through persistent attention over the years, safety at work has become deeply embedded in Alcoa’s culture and “the way we do things around here.”
In the late 1990s, activists raised allegations at an Alcoa annual shareholders meeting claiming that health and safety conditions at one of Alcoa’s Mexican facilities had deteriorated. The individual who spoke at the meeting at the meeting concluded by saying that the company’s behavior in Mexico was “inconsistent with its widely publicized values.” The company promptly launched an investigation, and Alcoa’s then CEO personally visited the plant. Although the company learned that many of the issues raised at the annual meeting were unfounded, it also discovered that a few injury incidents and the subsequent actions taken by local managers were not reported to corporate headquarters, as required by company policy. Meetings help with local government officials over safety incidents at the facility were also not reported, even though the results of these meetings indicated Alcoa followed all appropriate laws and regulations.
Following the review, the company concluded that although the business unit management’s response to the safety incidents uncovered in the investigation was adequate, there was “a breach of the letter and spirit of our communication practices with respect to major incidents” as well as “a serious lack of understanding when it came to incident classification, reporting, and recordkeeping of occupational illnesses. “The lack of reporting these safety incidents to others in the company was viewed as unacceptable—it meant others in the company were denied the opportunity to learn and possibly prevent similar occurrences at other Alcoa facilities.
A change is leadership was made at the facility, despite the manager’s stellar record of increased sales and profitability and high marks for quality and customer satisfaction. In an open letter to the entire company. Alcoa’s then CEO re-emphasized that full compliance with both the letter—and spirit—of Alcoa’s policies was imperative, and anything less unacceptable.
Over time, Alcoa’s focus was on safety has paid off. In 2013, Alcoa employees and contractors worldwide worked an entire calendar year fatality-free for the first time in over five decades. The 2014 year-end Alcoa lost workday (LWD) incident rate was 0.10. (This number represents the number of injuries and illnesses resulting in one or more days away from work per 100 full-time workers.) That same year:
- 42.7% of Alcoa’s locations worldwide had zero recordable injuries.
- 80.5% of Alcoa’s locations worldwide had zero lost workdays.
These numbers reflect the commitment of not only Alcoa leaders but also the employees, who are empowered to take personal responsibility for ensuring their safety and that of their coworkers—even if that means stopping work when they feel unsafe or unsure. In 2013, to further embed and enhance a values-based culture of integrity and compliance, Alcoa formed a global “Integrity Champion Network.” This group of high-potential employees was appointed to work within their businesses to raise awareness, promote a “Speak-Up” culture, and provide advice on various ethics and compliance matters. In 2014, Alcoa released a new Code of Conduct, providing a road map for “Advancing with Integrity.” Every employee worldwide received the Code, reinforcing Alcoa’s values and the shared responsibility for conducting business in accordance with Alcoa’s highest ethical standards and the law. At the same time, Alcoa’s 24/7 hotline was rebranded as the “Integrity Line.” Alcoa’s ethics and compliance program continues to focus on anticorruption, trade compliance, and adherence with all relevant U.S. and national laws and regulations.”
2. What role did top management commitment play in developing the ethical work climate and organizational performance seen at Alcoa? What other ethical safeguards are mentioned in the case to support the company’s efforts at developing a strong ethical culture?
4. Can the focus on safety seen at Alcoa be duplicated into other ethics and compliance areas and how would this be accomplished?
Alcoa has always had a strong values-based culture. Two of Alcoa’s values center upon health and safety. As with any large, diversified organization, it is not easy for values to be shared and practiced consistently throughout all units. Although it was agreed that Alcoa was in compliance with appropriate laws and regulations at one of its Mexican plants, charges were made that Alcoa did not live up to its core values of health and safety.
Keep in mind to integrate the core values of Saint Leo University that you believe should apply to this issue. Responses for each case discussion question should be in paragraph form and be approximately 250-300 words in length.
Using the case study guidelines from the video in the student resources module complete the following case study located in the textbook:
Case 2: Bark & CO.
Using APA formatting guidelines, in 2-3 pages, respond to questions 1 and 2 making sure to integrate the core value of integrity.
After Matt Meeker, Henrik Werdelin, and Carly Strife met through mutual friends, the trio decided to launch a business together. They noticed that consumer spending on pets in the United States had grown by 33 percent between 2006 and 2011 to $51 billion, two-thirds of which owners spent on dogs. The entrepreneurs also saw the success that Birchbox, a company that sells cosmetic and beauty supplies through a subscription model, had achieved and began soliciting valuable advice from that company’s cofounders about their business model. In 2011, while still working in their day jobs, Meeker, Werdelin, and Strife used their own money and investments from family members and friends to launch Bark & Co., a business that for about $20 per month ships boxes of dog treats and toys to subscribers. In their first month, the trio shipped 94 boxes to friends and acquaintances who had signed up. To differentiate their company’s products, the entrepreneurs scoured Etsy, The Grommet, and trade shows, looking for items that pet owners could not find at large chains such as PetSmart and PetCo. Each box follows a theme. For instance, one April, the BarkBox included baseball-shaped cookies and toys that resembled baseball caps and bats. The boxes have a gross profit margin of about 36 percent of sales, and the company has shipped more than 4.5 million of them.
Sales began to grow, and in 2012, Meeker, Werdelin, and Strife landed $1.7 million in venture capital; they received another $15 million from venture capital firms over the next two years. Meeker says that with its blend of unique products, Bark & Co., which is based in New York City, tapped into a large and growing segment of dog “parents” who treat their pets like children. Today, pet industry sales are $70 billion per year, and Bark & Co. has extended its product offerings beyond its original BarkBoxes to include BarkShop, an e-commerce site that allows dog owners to purchase a variety of products without committing to a subscription. The founders say that BarkShop has sold 25 million products. Its BarkPost blog, filled with dog news and feel-good stories, attracts 10 million unique visitors per month and is supported by advertisers such as American Express, Procter & Gamble, Subaru, and others. BarkLive sponsors events aimed at dogs and their owners, such as BarkFest, a day-long festival in cities across the United States that features live music and fun events. The company’s product extensions carry gross profit margins that average 50 percent of sales, but 75 percent of Bark & Co.’s revenue still comes from its BarkBox subscriptions.
Bark & Co.’s annual sales have doubled in each of the last two years and now total $100 million. The company employs 150 people but owns no warehouses, choosing instead to outsource the packing and shipping of its BarkBoxes. Although Bark & Co.’s subscription business is profitable, the company as a whole is not yet profitable but is cash flow positive. The company has built its customer base primarily through social media, landing 1.2 million Instagram followers and 2.1 million Facebook likes.
In 2016, Bark & Co. raised an additional $60 million in funding from venture capital companies, including August Capital and Resolute Ventures, to fuel its growth. Competitors, including PetGiftBox and PawPack, have entered the market, but Bark & Co. remains the dominant player in the industry segment. The entrepreneurs recognize the importance of constant innovation and have created BarkBeta, a team that is charged with developing new business ideas for the company. BarkBeta’s budget is 1 percent of the company’s revenue. Several of the company’s innovations have failed, including BarkCam, a mobile app designed to connect people with rescue dogs, and BarkCare, an in-home concierge veterinary service launched in New York City and San Francisco. Bark & Co. currently is exploring BarkAir, a chartered jet service that allows people and their dogs to fly together in comfort and style, and an Ancestry.com style DNA test for dogs (“Any wolf in your genes?”). The company is also testing “pup-up” retail stores that will allow dogs, each equipped with RFID technology and unaccompanied by their owners, in shifts of five to enter the store and “shop” for their favorite toys and treats while their owners watch.
Meeker, Werdelin, and Strife are feeling pressure from the company’s venture capital investors. Because of the risks associated with their investments in young companies, venture capital firms expect to receive returns of at least five times their original investments. For the venture capital firms that invested in Bark & Co. to get back five times what they invested, the company will have to grow to an estimated $500 million in sales within the next three or four years. Meeker says that the founders’ goal is to give the investors a return of 100 times their investment by becoming the next “Disney for dogs.” The question is: Can the entrepreneurs produce those challenging results, and, if so, how do they do it?
- What advantages does a subscription pricing model offer a business?
- Notice that several of Bark & Co.’s ideas for new businesses have failed. Is this unusual? Why is it important for businesses to continue to innovate, even when their founders know that many of the innovations will fail? What steps can Meeker, Werdelin, and Strife take to encourage creativity in their company?
Using the information provided by the entrepreneur on how to write a vision and mission statement incorporating values, and the SLU core value of integrity, write a vision and mission statement for the entrepreneur’s business.