How Henry Ford Revolutionized Manufacturing Offering $5 Per Hour Wage with Shorter Working Hours
On January 1914, Henry Ford announced a radical decision at his manufacturing plant. He increased his workers wages from $2.34/day to $5/day and reduced the working time from 9 hours to 8 hours per day.
Legends goes that Ford did this so that his employees could buy a car of their own, but he did this to motivate them and make them productive.
When this decision was announced, the newspapers had a field day with it. Ford’s PR team worked the presses to change the narrative and make it look like he was doing this to enable the factory workers to be able to buy one of Ford’s cars.
While this move was one of the most generous pay hikes in corporate history, Henry Ford knew exactly what he was doing. By the end of 1914, Henry Ford’s 13,000 workers made 260,000 cars annually.
The rest of the industry with 66,000 workers produced only 280,000 cars. Ford’s workers were 5 times more productive than the average industry assembly line employee.
In another 5 years, Ford was rolling out the ‘Model-T’ car every 24 seconds. In the initial years, it took 12 hours just for one car!
During this time factory workers came in and were easily replaced. Labour was not seen as an asset. With this single move, Ford created a new corporate workforce and birthed the American middle class.
This move had a massive ripple effect. Here’s how:
Employee Turnover: Until 1914, Henry Ford, hired 300 men for 100 jobs. Before the change, there was constant turnover because employees were bored and had to shift jobs. With the new change, Ford provided an offer that was too good to refuse. The best of the workers were motivated to stay and produce at the best of their ability.
Absenteeism Dropped: Before the change, workers would leave in the middle of their shifts. They got tired and unmotivated to continue working because they had little to lose because they were paid poorly. This absenteeism greatly affected the production with a lot of starts and stops. With the new pay increase, they were bound to their stations.
The Smart Labour Renaissance: With the new changes, word spread across the US about the gold rush in Detroit. Within 24 hours, thousands of men queued outside of the Ford factory looking for a job. Ford could now pick from the very best and dramatically improve efficiencies in the automotive industry.
Productivity: This change increased productivity because it allowed the workers to get in rhythm and not constantly shift jobs. This meant they were moving up the learning curve as they stuck to their main posts. As each employee got better, Ford could slowly implement new processes without worry about training expenses of each employee.
Takeaway: This philosophy shifted the entire car industry and became the catalyst of workplace productivity. It was the genesis of the 8 hour work day. It opened the doors for new training methods and understanding the intrinsic motivations that drove employees to be productive at work.