Oilfield Safety & the Skin in the Game Heuristic

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Safety as a Risk Management Tool Paul O’Neill ushered safety into the sphere of risk management when he used safety as an instrument to turn around the struggling company Alcoa. In so doing, he identified a new, previously uncharted domain of risk management, casting a new light on risk management for a “lunch pail” industry. O’Neill explained that Alcoa’s mission to become a “safety leader” was based on neither grand initiatives nor episodic programs; rather, it was the result of persistent attention to changing behaviors, reflected in day-to-day decisions (Spear, 1999), the collective effect of which he believed to be profound. Alcoa emphasized the importance of safety in many ways; for example, O’Neill insisted that the first application of a company-wide computer network created in 1991 should be for reporting and reviewing safety measures, and he ensured that every Alcoa employee had access to this data. O’Neill wanted people to be able to report problems, solicit assistance, publicize achievements, and understand that safety came first (p. 3). Through Alcoa, O’Neill demonstrated how a new way for organizations to approach risk management and maximize investors’ returns. In 1986, the Pittsburgh-based company had 35,700 employees, had a market cap of $2.9 billion, and recorded $264 million in net income on sales of $4.6 billion. When O'Neill retired at the end of 2000 at age 65, Alcoa had 140,000 employees and record profits of $1.5 billion on sales of $22.9 billion. In addition, its market cap, up 126% from 1999 when Alcoa was the top stock among the 30 Dow Jones industrials, which is $29.9 billion today (Arndt, 2001). ''His major impact has been to run an old-economy company as though it were a new-economy company,'' noted Donald S. Perkins, a retired Alcoa director. ''He is not a traditionalist in any sense of the word'' (p. 1). Many other

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