Smart Business Decisions That Changed The Course Of History: Henry Ford's $5-a-Day Revolution

January 27, 2021

Once in a great while, a leader makes a truly game-changing decision that shifts not only the strategy of a single company but how everyone does business as well.

These big decisions are counterintuitive, they go against conventional wisdom.

In hindsight, taking a different direction may seem easy, but these bet-the-company moves involve drama, doubt, and high tension.

In 1913, to help meet the growing demand for the Model T, Henry Ford turned his attention to improving the manufacturing processes. The business model Ford developed—production on a grand scale, performed by well-paid workers—spread throughout the world and became the manufacturing standard for everything from vacuum sweepers to cars, and more.

Transforming the Assembly Line

The moving assembly line was perhaps Ford Motor Company's single greatest contribution to the automotive manufacturing process. First implemented at the Highland Park plant in Michigan, the new technique allowed individual workers to stay in one place and perform the same task repeatedly on multiple vehicles that passed by them.

The moving assembly line proved tremendously efficient, helping the company to far surpass the production levels of its competitors while making its vehicles more affordable.

The $5-a-day Workday

After the success of the moving assembly line, Henry Ford had another transformative idea: in January 1914, he startled the world by announcing that Ford Motor Company would pay $5 a day to its workers. The pay increase would also be accompanied by a shorter workday (from nine to eight hours). While this rate didn't automatically apply to every worker, it more than doubled the average autoworker's wage.

While Henry's primary objective was to reduce worker attrition—labour turnover from monotonous assembly line work was high—newspapers from all over the world reported the story as an extraordinary gesture of goodwill.

Thousands of Workers Flock to Detroit

After Ford’s announcement, thousands of prospective workers showed up at the Ford Motor Company employment office. People surged toward Detroit from the American South and the nations of Europe. As expected, employee turnover diminished. And, by creating an eight-hour day, Ford could run three shifts instead of two, increasing productivity.

Henry Ford had reasoned that since it was now possible to build inexpensive cars in volume, more of them could be sold if employees could afford to buy them. The $5 day helped better the lot of all American workers and contributed to the emergence of the American middle class. In the process, Henry Ford had changed manufacturing forever.

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