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Why Henry Ford doubled wages

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in FMLA Guidelines,Human Resources,Leaders & Managers,Management Training

When Henry Ford announced Five-Dollar Day in 1914, it created a sensation. Overnight, the Ford Motor Co. would double the standard wage of automobile workers. That came on top of a series of innovations since the company’s inception, including a bonus system and medical department. By the 1910s, the company already had added the Ford Motor Band for its musical employees, a company newspaper to advance camaraderie, and a 20-acre park with sports fields, playgrounds and a bandstand.

Why did Ford — remembered for assembly-line automation, not employee empathy — create a new wage standard?

Two basic reasons:
  1. Productivity. Baffled about why workers’ output had increased so little, Ford hired a researcher who discovered that, despite its technological advances, the company was being dragged down by absenteeism, shoddy work and a 370 percent turnover rate. All stemmed from long hours of monotonous tasks, combined with low wages, poor housing and working conditions, and foremen’s arbitrary management.

    By doubling wages, Ford figured he could increase efficiency, raise morale and retain the best workers.

  2. Fairness. Simply put, Ford initiated an early version of profit-sharing. His announcement thrilled working stiffs and infuriated Wall Street. Within Ford Motor Co., it neutralized acidic relations between employees and managers.

    Muckraking journalist Ida Tarbell became convinced that Ford was giving factory workers “a chance for … a good life.”

    “I believe it is a disgrace for a man to die rich,” Ford declared. “Good will is about the only fact there is in life.”
—Adapted from The People’s Tycoon: Henry Ford and the American Century, Steven Watts, Alfred A. Knopf.

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