Over the years, manufacturers have used a variety of approaches to streamline shop-floor processes—to define, measure, and improve them, and ultimately make them more efficient, flexible, and effective. "The question for us was, can't we do the same thing for HR?" says Tom Mordowanec, Director of People Services at Alcoa Inc., the $26.2 billion Pittsburgh-based aluminum company.

The answer, Mordowanec found, is clearly "yes." For the past few years, he and his team have been applying a set of principles originally used in Alcoa's production operations to the People Services group. Known as the Alcoa Business System (ABS), these principles define the way work should be done across the company—and when Mordowanec took on his current role in 2001, he decided to run with the concept.

"It made sense, because we kind of see ourselves as being a professional/administrative factory," Mordowanec says—and it's a big factory, at that. People Services is a shared services organization that supports benefits and payroll for Alcoa in North America, as well as HR systems and travel and expense management for the company's global operations. Overall, they handle some $1.5 billion in annual expenditures.

In applying the ABS approach to HR, Mordowanec's group focused on three key steps: understanding the customer, defining and standardizing work, and establishing a "help chain."

Understanding the Customer
"Starting out with the customer is key to the Alcoa Business System," says Mordowanec. "As a first step, we understand customers' requirements for our services, and make sure we're not guessing about any of that."

For the People Services group, HR directors and line executives of Alcoa business units are key customers—and once a year, Mordowanec's team sits down with them in a "customer opportunity session." That session involves a formal process of reviewing activities and results from the prior year, exploring what changes need to be made, and discussing new initiatives and objectives to pursue in the coming year.

The session results in a detailed and definitive service-level agreement. "We clearly outline exactly what we're going to provide, what the businesses will pay for it, and how we will be measured over time to determine whether or not we've been successful," Mordowanec says. All of this helps ensure that People Services and their customers are aligned and working with the same goals and expectations.

Defining and Standardizing Work
"The second step in the ABS is to bring some science to the way you do business," Mordowanec continues. "For that, we utilize an ABS concept called 'standard work,' in which the content, sequence, timing, and outcome of a process is documented, and then performance of the process is measured.

"In health cost containment, for example, we have an eight-point program for managing our costs," Mordowanec says. "It includes things like plan design, the way we approach the supply base, and how we contract with health plans." He adds that by using performance measurements, "we can see whether our standard work is producing satisfactory results, or if we need to change the process."

Mordowanec's group has created standard work in a variety of areas, including the procurement of services such as disability benefits management and administrative services; project management; and problem solving. The approach helps ensure consistency and quality in the group's activities and, most important, provides a foundation for continuous improvement. "Without this kind of standardization and discipline, there is really no good way to make things better, because you can't really track down problems," Mordowanec explains. "You might get lucky, but we don't want to rely on luck. We want to rely on a disciplined, measurable approach."

Establishing the Help Chain
Even in the most high-performing processes, things don't work perfectly 100% of the time. The ABS recognizes that reality by calling for the creation of a "help chain" that spells out what to do when problems arise. "When the normal process fails people in some way, the help chain makes it clear to them how to get help and do what is called 'restore flow,'" Mordowanec says.

For example, if an Alcoa employee talking to one of the company's health plan providers is unable to resolve a problem with that provider, he or she can access a documented process that explains where to go next to find help.

"The employee then knows to go to his or her HR person, who then can interface with somebody on my team who will then escalate the issue, get it resolved, and get back to the employee," Mordowanec says. "The steps in that help chain process are very clearly defined, so that we quickly resolve the issue, restore flow, and move forward."

Communication, Patience, and Results
When Mordowanec and his team began implementing the ABS, they ran into considerable skepticism in their organization. "Historically, this has been a profession where people were pretty much left to their own devices as to how they were going to go about getting work done," Mordowanec explains. "So when you suggest that there's a new approach that has much more science to it, a lot of people react very quickly and say, 'You're underestimating the sophistication and variability of what I do if you think those types of principles can be applied here.'"

Overcoming that kind of resistance took constant communication, Mordowanec says: "You have to make people see that this is actually a more sophisticated approach, not a less sophisticated approach. I told people, 'You have tremendous expertise. Let's take that expertise and your good ideas about how work can be done and put it down on paper.'"

Patience, too, was critical to success. "We started five years ago, and it took a couple years to really get it," Mordowanec says. "The only way you can really make people believers is to stay with it until the results come in. So that's what we did—and the results have come in."

For example, health care cost containment was the first of the group's areas to be brought under the ABS, so it's furthest along in the process. At a time when rising health care costs have been making headlines, Alcoa has experienced a health care cost trend of $0 for the last two years. Not surprising, last year, the People Services group won an Alcoa global leadership Best Resource Initiative award for their health care cost containment strategy. In general, adds Mordowanec, "These initiatives are really improving the quality of services that we provide while at the same time letting us make sure that we're not spending a dime more than we need to."

Mordowanec says, "A lot of people find all this to be kind of counterintuitive, and think there is no way to apply this kind of structure and discipline to HR. But the fact of the matter is that you can. And we've found that if you make that leap, you really can differentiate your organization."

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