In 1914, Henry Ford made a high-profile statement that shocked the whole country. After that, the financial editor of The New York Times, where the new information was published, hesitantly entered the room where the news department was located, and asked the employees in surprise: “Is he really crazy? Don't you think he's crazy? ”
The causes of the shock
That morning, Ford began paying his employees $ 5 a day. In 1914, this was twice the average salary of employees of automobile companies.
Moreover, he reduced the working day from 9 to 8 hours. In those years, a 60-hour work week was standard for American manufacturing organizations.
Henry Ford announced a salary increase at a meeting with his company managers. He wrote on the blackboard: the minimum wage is $ 2.34 and a nine-hour work day. Then he threw the chalk and said: "Count how much more we can give our employees."
The company's managers worked all day, gradually adding 25 cents. Every time Ford came back and said: "Not enough." In the end, they raised the base rate to $ 4.80 per day. One employee suggested rounding this amount to $ 5. “Good,” Ford replied. “We will do it.”
Journalistic investigation
The young journalist traveled to Detroit to learn more about this revolutionary turn of events. His name was Edward Peter Garett, but he wrote under the name Gareth Garrett.
Arriving in Detroit, Garrett saw industrial company employees panic and predict various disasters. They feared that raising salaries in one company would lead the founders of other organizations to leave the city. Owners of automobile companies who stay and try to raise their salaries will eventually go bankrupt. And Ford employees will be "demoralized due to sudden financial prosperity." And, of course, Ford Motor will subsequently go bankrupt.
Fortunately, Garrett was able to meet with Ford and discuss revolutionary changes. He outlined this lengthy interview in his book, published in 1952. Garrett recalls asking the owner of the company why he decided to raise wages, while other directors tried to reduce them to the maximum acceptable level. Ford replied that this would provide better results. “If the cleaner is in place and diligently fulfills his duties, he will help us save $ 5 a day by picking up small parts from the floor, instead of throwing them away.”
Ford Explained
High salaries are needed. This helps people cope with the stress and monotony of the conveyor belt. In January 1914, the correct organization of the system, constantly in motion, helped to significantly reduce the time spent on assembling the car. However, the high pace and uniformity caused difficulties. Many employees could not cope with the tasks within an eight-hour working day, regardless of the level of salary.
There was an even more significant reason for the increase in wages. Ford wrote about this in 1926 in his book Today and Tomorrow. In his opinion, the owner of the company, employees and society constitute a single whole. And if an enterprise can increase salaries, lower prices, but does not do this, it destroys itself, thereby limiting the number of customers. This idea may seem crazy, but it has proved its worth.In 1914, the company made more sales than all other automotive companies combined. By 1915, sales increased substantially. In 1920, Ford sold a million cars a year.
“We are increasing the purchasing power of our employees, and they are increasing the purchasing power of other people, and so on,” writes Ford.
In 1919, he again raised the minimum wage, this time to $ 6 a day. This allowed for even greater productivity. “Increasing pay to $ 5 was the most cost effective way we have ever used. And $ 6 a day is even cheaper than 5. I don’t know how we will develop further. ”
Conclusion
The new approach has allowed the creation of the largest company that is successfully flourishing to this day. Ford made cars available to its workers. In order to purchase a car, they needed to work only 4 months. Thanks to Ford Motor, 15 million Americans were able to drive. Moreover, this revolutionary turn set a new level of wages. Despite all the fears and warnings, other companies eventually adopted a new policy.