Dissection of Henry Ford’s Innovation

In reading Free Prize Inside!, I ran across a paragraph about Henry Ford. I’ll quote below from the Wikipedia article.

Ford astonished the world in 1914 by offering a $5 a day wage that more than doubled the rate of most of his workers. The move proved hugely profitable. Instead of constant turnover of employees, the best mechanics in Detroit flocked to Ford, bringing in their human capital and expertise, raising productivity, and lowering training costs.

What strikes me most about this tactic is that it goes against everything you would think works. Raising the pay rate of your employees to more than double their current rate — that has failure written all over it.

However, on closer examination, it had this effect:

  • Created massive interest and desire to work at Ford Motor Company.
  • Drove employees to work harder and produce more, because they knew there were 100 people that could fill their position.
  • Generated a lot of interest in Ford Motor Company.
  • Enabled Ford workers to afford the cars they were producing.

Ford’s innovation is a fascinating look at how one company maximized the productivity of their workforce. It’s a good use of time.