Henry Ford - A Great Innovator

Ford's Employee-Friendly Practices

Ford had generous labor policies and believed in the importance of harmonious relations with workers. In order to retain the workers, Ford gave them bonuses and other benefits including free medical treatment, and invested heavily in training programs. A sociology department was established in mid-1910 to carry out research studies on employees' social attitudes, their loyalty and obedience. The studies helped improve the plant layout and the job description of workers. Sports facilities like fields and playgrounds for the company's employees and their families were set up.

Ford said, "I want the whole organization dominated by a just, generous and humane policy."²⁵ In spite of the benefits offered to employees, the employee turnover rate at the Ford Co. in late-1913 was around 50%. The high turnover was due to the repetitive nature of assembly-line work and continuous increases in workers' production targets. Moreover, the workers were getting a wage of just $2.38 for a nine-hour workday. Ford soon realized that employee morale was low. In January 1914, he announced a significant increase in employee wages and a decrease in labor hours. One of the Detroit newspaper published Ford's announcement, "The Ford Motor Company, the greatest and most successful automobile manufacturing company in the world, will, on January 12, inaugurate the greatest revolution in the matter of rewards for its workers ever known to the industrial world.

At one stroke it will reduce the hours of labor from nine to eight, and add to every man's pay a share of the profits of the house. The smallest amount to be received by a man 22 years old and upwards will be $5 per day."²⁶ While the industry paid a standard wage rate of $2.50, Ford paid $5 to attract more employees and prevent those already on the payroll from leaving the company. This produced the desired high stability in the workforce and a decline in operating costs.

Ford said of his move, "The payment of five dollars a day for an eight-hour day was one of the finest cost-cutting moves we ever made."²⁷ Ford also introduced a 'five-day work week,' giving employees a break on Saturdays. All these measures raised worker productivity. The company's profits soared from $30 million in 1914 to $60 million in 1916.

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25] As quoted in the article, "Driving Force: Henry Ford," by Lee Iacocca, TIME.

26] As quoted in the article, "What Titans Can Teach Us," by Richard Tedlow, Harvard Business Review, December 2001.

27] As quoted in the article, "Henry Ford and the Model T," posted on www.wiley.com.

Case Details

Case Code : LDEN025
Themes: Corporate Social Responsibility, Entrepreneurship
Case Length : 13 Pages
Period : 1903
Organization : Ford Motor Corporation
Pub Date : 2003
Teaching Note : Not Available
Countries : USA
Industry : Automobile

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