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Henry Fords 1913 Workforce Challenge

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We all think of Henry Ford as visionary and applaud his achievement, but what few people realise is when he was building the Ford Motor Company, and introducing the moving assembly and production line, Henry had a few workforce challenges he needed to overcome.When Ford introduced the production line to his Model T Assembly plant, it brought with it an unexpected problem. Workforce Engagement and Moral declined. Not because people were working harder, rather because people we bored. With declining moral, came other challenges.On any given day, 10% of his workforce would be absent. This meant he had to employ an additional 1300 odd people, just to fill the vacant daily roles on the line. Yearly turnover in 1913 was 370%. Thats almost the equivalent of a brand new workforce, every 3 months.  That year, 52,000 workers needed to be hired, just to maintain the existing numbers.At Christmas 1913 out of 15,000 employees on the payroll, only 640 had been there more than 3 years. Moral was bad. Employees were even fighting.Whilst his factory performance during this time was unquestionably impressive (that year he doubled production and reduced his wages bill), the management of his people was poor. He could never have gone on to build one of the largest and most successful companies of all time had he not got this under control.Ford addressed the challenge head on in 1914, with a number of strategies including reducing the work day from 9hrs to 8hrs, (which also allowed him to increased the number of daily shifts from two to three), and doubling the rate of pay for the average worker. From around $2.50 to $5 / day. This decision was known as the $5 day decision and whilst industry figures including competitors called it ludicrous, and suggested it would see the end of Ford and the Ford Motor Company, it proved to be a stroke of genius.Within a year, this strategy had made significant improvements. Turnover of staff reduced to just 16%. Productivity was up 40 - 70% and the number of workers hired that year was only 2000 (down by over 50,000 on the year before). Not only that, the media attention he gained by doubling the wage meant he now had significantly more people applying for roles at Ford Motor Company, and he was able to pick the brightest and the best - much again to his competitors dislike.By the way, his profits were up significantly too.Some people say this decision was made as a way to improve sales of his vehicles, by paying enough that his workers could afford to buy one, but thats simply not true. He did it to fix his workforce challenge.Henry Ford himself said “introducing the $5 day was one of the best cost cutting decisions I ever made”.Do you know your scores for absenteeism, staff turn over or even moral. They are not as hard to measure and calculate as you might think. And if you think your “just about industry average”, I can assure you that you can make great improvements to your workforce, your productivity and of course your profitability by moving your numbers from “average” to “best in Industry”.

The World According to Shane - You can’t grow a business if you are constantly playing catch up with the team. Even the great Henry Ford found this to be true. What can you do to create a $5 day moment in your workforce and maybe, just maybe, become the next Henry Ford





Follow me at:
twitter: shane-ridley

LinkedIn: Shane Ridley (Toowoomba, Au)
Web: www.shaneridley.com
Ph: +61 (7) 4659 9300 

Source and Credit:
This story, including the facts come from Verne Harnish’s new book The Greatest Business Decisions of all time, which outlines 18 great business decisions, including Apple returning Steve Jobs as CEO and Boeing's bet on the 707. The book is available for purchase online at Amazon.com. and I highly recommend it.
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Comments

Ryan Myler

Director/ Financial Planner

Optimas Financial Planning

Shane has provided me with invaluable advice, being that I am in start up phase with my business. His knowledge of business in general, along with his strong understanding of the current trend toward social media and it's influence, have provided me with insights on how to grow my company. I would strongly recommend Shane in a business mentoring role due to his depth knowledge and broad experience, along with his superior story telling ability to make the complex simple.


June 25, 2012

Indiana Forrest-Bisley

Business Development Manager Australian Exhibitions & Conferences

Shane exhibited with us at the 2012 Safety in Action trade show - Melbourne. I found him to be extremely professional and furthermore his pre employment training services were a hit at the show. We will see Shane return to the safety show Perth (August 7-9). If you're in need of ANY type of pre employment training
I would strongly reccommend OTrain to anyone within HR."


June 29, 2012