Decision-Making Processes
Alcoa has a decentralized structure, with many of the day-to-day business decisions made within the various business units and regions. Ultimately, all key strategic decisions must be approved by the Board of Directors. Others may require Executive Council approval.
Supporting this structure are a number of decision-making processes at the corporate and business-unit levels.
Capital
Alcoa allocates capital dollars between growth opportunities and sustaining projects. The amount of capital that is allocated to growth is determined by the following criteria:
- Comparison of capital expenditures with best-in-class peers;
- Assessment of new revenue streams necessary to meet stretch targets;
- Analysis of funding constraints given cash flow and debt ratios; and
- Aggregation of committed business unit spending.
The growth capital is disbursed among competing opportunities based on whether a business has earned the right to grow using the following criteria:
- Attractiveness of the business unit’s target markets (defined by growth rates and margins);
- Strength of the business unit’s competitive position (defined by cost efficiency versus peers, ownership of distinctive technology, and other sources of advantage); and
- Past-project performance (actual results versus original business case of similar investments, historical business unit returns versus proposed internal rate of return).
All proposed projects (growth and sustaining) must be reviewed and approved by individuals across diverse disciplines via routing of the proposal through an electronic document management system. This routing includes more senior members of management as the proposed cost increases. All projects greater than US$10 million must be approved by the chief financial officer and chief executive officer. Projects greater than US$50 million must also be presented to, and approved by, the Board of Directors.
As we recover from the economic downturn, we continue to carefully review and evaluate all active and proposed capital projects to ensure that we focus our investments on the most critical projects and those that offer the best opportunities for the future.
New Facilities
We use a stage gate process to help us determine the feasibility of a new facility and then deliver an approved project on time and within budget.
The process ensures that complex, major construction projects are broken up into highly specified tasks, properly sequenced and resourced, and with clear timing and accountabilities for completion. These activities and connections between people in the process are the stages. The integrity of the process is protected by a series of built-in tests designed to confirm that all requirements of a particular stage have been met before the project proceeds to the following stage.
In the initial screening phase, a key component is assessing a project for its economic, environmental, and social effects. Integrating this triple-bottom-line evaluation into the early phase of a project helps us move forward only on those projects that we consider sustainable.
Alcoa Stage Gate Process
Operational
Within our facilities, the Alcoa Business System (ABS) helps our employees determine, prioritize, and implement their continuous improvement efforts.
ABS is an integrated set of principles and tools used to manage our businesses. Its decision-making tools include the A3 planning diagram, kaizen (continuous improvement) events, daily management boards, and more.
Through ABS, we first gain stability and predictability in our manufacturing processes and then, from that base, continuous improvement. Improvements made in one facility are shared with others through benchmarking, training, and ongoing communications.
Policy
Suggestions for new or revised corporate policies originate with the chief executive officer, the governance and nominating committee of the board, the Executive Council, and, occasionally, our shareholders.
Internal consultation on any suggested policy adjustments occurs at the Executive Council level, with subject matter experts inside the company being invited to provide input. On occasion, the Board of Directors adopts company-wide policies, but most are determined by the Executive Council.
Alcoa Organizational Chart
Acquisitions and Divestitures
To help us achieve our financial goals, we need to supplement organic growth with sensible acquisitions and appropriate divestitures. The following decision-making processes help ensure success in those activities.
Acquisition Process
Divestiture Process
Throughout each of these processes, financial and non-financial criteria are evaluated by cross-functional teams.
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