Spotlight on Strategy: Ford Motor Company
As part of our ongoing series highlighting smart strategic stories from companies all over the world, this week our Spotlight on Strategy highlights Ford.
Most people would not be surprised if told Ford Motor Company is responsible for one of the greatest business decisions ever made. After all, the Model T made automobiles accessible to the middle class and Henry Ford’s assembly line production forever changed manufacturing in America. However, there is still more to be learned from this influential company.
When the Model T was first mass-produced and marketed to the middle class, Henry Ford said of the vehicle:
“I will build a car for the great multitude. It will be large enough for the family, but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise. But it will be so low in price that no man making a good salary will be unable to own one – and enjoy with his family the blessing of hours of pleasure in God’s great open spaces.”
Henry was well on his way to success. In fact, the moving assembly line was far more efficient and productive than he could have imagined. Production was doubling year by year, but employee turnover was also accelerating. The dull, rote work of an assembly line was causing employees to quit faster than they could be replaced. At the behest of his lieutenant, James Couzens, Ford immediately sought a solution.
He overhauled company employment policies: shorter workdays and a doubling of the basic pay rate to $5 a day. This $5 would cost the company $10 million a year. The investment would be worth far more; within a year annual employee turnover dropped from 370% to just %16 and more than that, the people making the Model T could now afford to buy one. That January Ford said to the press, “We believe in making 20,000 men prosperous and contented rather than follow the plan of making a few slave drivers in our establishment millionaires.”
What can be learned from doubling employee wages? Certainly this isn’t a possible solution for many, if not most, businesses. In a broader scope, Ford’s actions can be seen more simply as investing in his employees. More than one hundred years later, there’s more than one way to incentivize employees, including education, balance and perks. Employees that are content are more willing to do their jobs and do them well. Ford demonstrated that a small investment can be worth millions, and that’s a lesson we can still learn today.