Meanwhile, some Alcoa executives in New York were telling me to make the investments and get the plant working, no matter what it took. They didn’t use those words, but the implication was clear. My bonus was based in large part on making the planned investments happen on time. Nonetheless, I stood my ground. The police held the trucks for 72 hours, and finally let them go.
This interference persisted, but the more it happened, the more patient and firm we became. We had slowdowns throughout our supply chain the whole first year because officials wanted money and we refused to pay. We couldn’t get goods out of the export–import office. The tax collectors threatened us with audits. The transportation company wouldn’t deliver.
Sticking to our principles was made easier because Alcoa is large, and we knew the federal government in Russia wanted this investment to be successful. After about 18 months, the supply chain started to move more quickly, the demands for payments disappeared, and the investment plan was back on schedule. Alcoa’s investment also attracted other foreign investment in can manufacturing, including major international players such as Ball, Rexam, and Can-Pack.
S+B: Did you ever worry that the costs of Alcoa’s safety and ethical standards would put you at a competitive disadvantage?
O’ROURKE: Just the opposite. It was rare to find aluminum cans on the store shelves in Russia. If we made the sheet in Europe and imported it to Russia, it would have cost us a 22 percent duty. If we could make the sheet in Russia, then our biggest competitor in Europe would bear that 22 percent duty. We had a first-mover advantage, and kept it.
Even without the investment in safety standards, we would still have had the market advantage, but that was never a choice for us. As far as I am concerned, it’s a smoke screen when companies make that argument. Think of all the disruptions and investigations that are avoided when safety incidents are eliminated. The best way is to face up to it, and live by your values everywhere. It is so much easier to have one set of rules.
Opening Up the Culture
S+B: You came to Russia, not speaking the language, not knowing anyone before you came, and imposing unfamiliar ethical standards that many people might have resented. How did you handle this?
O’ROURKE: Fortunately, I didn’t have to act alone. The law says that the managing general director of a plant that size has to be Russian. So we had Russian general managers [GMs] in both plants, and in the Moscow office. The GM in Samara, where I lived, became a friend and an advisor. During my first year, I found out they had planned a lunch and dinner for several hundred people on May 9, 2005. We were losing money at the time, and we didn’t have the cash to spend on parties. At a staff meeting, I announced we were going to cancel the event.
The GM pulled me aside later, and said, “I know what you are trying to do, but don’t cancel that one.” May 9 is Victory Day in Russia; people honor the 27 million Russian men who died during World War II. The lunch was for poor veterans of that war.
When he explained this to me, I put the event back on the calendar. I also called the Alcoa Foundation and asked what else we could do for the veterans. We offered every one of them the choice of a new refrigerator or new windows in their apartments. I marched in the parade and gave my first speech in Russian.